Beat the TSX With This Unstoppable Dividend Stock

This TSX stock has handily outperformed the TSX with its returns. It has increased its dividend in nine consecutive years.

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The TSX has reliable dividend stocks like Fortis and Enbridge, which pay you regular cash. However, in this article, I’ll focus on one top Canadian stock that consistently pays and grows its dividend, is part of the S&P/TSX Canadian Dividend Aristocrats Index, and has been delivering market-beating returns. 

Beat TSX with this top dividend stock

goeasy (TSX:GSY) is a top bet to earn steady dividend income and generate substantial capital gains in the long term. Thanks to its solid fundamentals and a growing earnings base, goeasy has paid a dividend for 19 consecutive years. Moreover, it has increased its dividend in the past nine years. 

goeasy offers products, including unsecured and secured loans the non-prime customers. It has a market cap of about $2 billion and has consistently outperformed the TSX with its stellar returns. 

goeasy’s incredible returns are supported by its robust revenue and earnings growth. For instance, goeasy stock has gained nearly 1,500% in the past decade. This reflects a CAGR (compound annual growth rate) of about 32%. 

Its revenue has grown at a CAGR of 20% in the last five years. Moreover, its five-year EPS (earnings per share) CAGR stands at an impressive 27%. 

Its multi-product strategy (including auto financing and home equity lending) and omnichannel offerings drive its loan originations and revenues. Meanwhile, improved product mix, stable credit performance, underwriting enhancements, and prudent expense management cushion its bottom line and dividend payouts. 

Why is goeasy a solid long-term pick?

goeasy stock witnessed a pullback, as investors feared that a weak macro environment would likely hurt its loan originations, credit quality, and share price. However, that didn’t play out. goeasy’s top line grew 23% in 2022, led by higher loan originations and strength across all of its products and channels. This growth came despite a weak macro backdrop. 

However, what stands out is that goeasy’s loan originations were high quality, indicating that the company’s future credit performance will likely remain solid. In the fourth quarter, its credit quality remained strong, reflecting lower net charge-offs and steady loan loss provision rates. Higher sales, stable credit performance, and tight expense management led to a 200-basis-point improvement in goeasy’s efficiency ratio. 

Thanks to its stellar financial performance, goeasy increased its annual dividend by 5.5% to $3.84 a share. 

Looking ahead, goeasy’s management remains upbeat and expects higher loan originations to drive its consumer loan portfolio and revenues. The company expects its consumer loan portfolio to be $5 billion by 2025 from about $2.80 billion at the end of 2022. The expansion of its loan portfolio will lead to double-digit growth in its top line over the next three years. 

Furthermore, goeasy expects its operating margin to continue to expand by 100 basis points per year through 2025. This will likely drive its earnings and future dividend payments.   

Bottom line 

goeasy’s resilient business, solid growth, and visibility over future sales and margins position it well to beat the TSX and enhance its shareholders’ returns through higher dividend payments. Also, a large non-prime credit market (about $200 billion) provides a solid foundation for growth. goeasy is trading at the next 12-month price-to-earnings multiple of 8.5, which is lower than the five-year average, providing a solid entry point. Further, it offers a decent yield of 3.2% based on its closing price of $120.20 on March 8. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Sneha Nahata has no position in any of the stocks mentioned. The Motley Fool recommends Enbridge and Fortis. The Motley Fool has a disclosure policy.

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