1 of the Smartest Stocks to Buy for Dividends and Share Repurchases in 2023

Many of the smartest dividend stocks you can buy are not just great picks for their dividends and may offer return potential besides the regular payouts.

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There are plenty of stocks that are only worth buying for their dividends. They may offer no considerable capital-appreciation potential, but as long as they are consistently paying the dividends (or, ideally, growing them) you bought them for, that’s usually enough.

However, the smartest dividend picks offer more than just healthy dividends. They may offer decent dividend growth as well as capital growth. They may also offer a healthy combination of price and dividends to make repurchasing the shares an effective long-term strategy.

One stock that may fit the bill well is goeasy (TSX:GSY). It’s one of the few highlights of the financial sector outside the set of bank stocks.

The company

goeasy is a Mississauga-based financial company and one of Canada’s largest non-bank lenders (for personal loans). It has been around for three decades and has developed a sizable footprint, with over 400 locations across the country. The company capitalizes on the underserved market of prospective borrowers with weak credit scores.

These borrowers cannot turn to the big banks or, in some cases, even credit unions. That’s where companies like goeasy come in. The company has streamlined its process and, to date, has catered to over 700,000 customers. It also offers home loans of up to $20,000 for a wide variety of purchases.

The organic growth of the company has been quite decent over the past three decades, and its financials are usually quite healthy. This adds to its strong fundamentals as an investment.

A powerful dividend stock

goeasy is now counted among the Dividend Aristocrats, and even though it’s still quite generous with its payout increases, that’s nothing compared to the transformation that occurred in the last decade. Between 2014 and 2022, the company grew its yearly payouts by more than 10 times.

The most recent dividend growth of $0.05 was more reasonable and sustainable, but the possibility that the company might offer a dividend bump far more generous than the industry/market norm is always there.

The 4% yield it’s offering right now is quite decent, though it’s mostly thanks to the heavy discount the stock comes with right now. Even with the most generous dividend growth, the yield usually remained low, because the stock’s growth kept it in check. But now that the stock is trading at a 56% discount, you can lock in a high yield (compared to its historical yield).

The capital-appreciation potential of this stock is just as compelling as its dividend increases used to be. Even in its discounted form, the returns for the last 10 years have been substantial at 850%.

Foolish takeaway

Thanks to its generous dividend increases, capital-growth potential, and heavy discount, goeasy is not just among the top stocks you can buy on the TSX right now. It’s also one of the stocks you can hold for years, even decades. You can also grow the size of your stake in goeasy without buying new shares by reinvesting the dividends back in the company.

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 Adam Othman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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