Investing in quality or fundamentally strong dividend stocks is a popular strategy for those looking to create a passive-income stream. While most dividend stocks have a quarterly payout, a handful of TSX companies have a monthly payout, making it ideal to cover a portion of your utility bills and offset any other recurring expense.
Here is one top under-$20 TSX dividend stock I would buy for monthly passive income.
Why I’m bullish on Savaria stock
The world has changed drastically in the last three years due to the COVID-19 pandemic, which resulted in multiple business pivots for companies across sectors. But Savaria (TSX:SIS) is part of a predictable vertical, as it provides products for the world’s aging population.
Savaria offers accessibility solutions for the elderly and physically challenged in Canada, the U.S., the U.K., Europe, and other international markets. Its business segments include accessibility, patient care, and adapted vehicles.
Savaria was not immune to the COVID-19 pandemic, as it wrestled with supply chain disruptions from China. However, it soon established a manufacturing facility in Mexico which began operations in just seven months.
Savaria’s acquisition of Handicare in 2021 has allowed it to benefit from cost and operational synergies. For example, it could efficiently cross-sell products to existing clients as the Vuelift was installed in showrooms across Europe.
Last January, Savaria finalized the acquisition of Ultron Technologies, a long-standing supplier of its printed circuit boards. Ultron’s expertise in integrated circuit designs, software development, and global procurement vertically integrates Savaria while diversifying its revenue streams.
Savaria has created massive wealth for long-term investors. Valued at a market cap of $1 billion, the TSX stock has returned 1,300% in the last 10 years after adjusting for dividends. In addition, the company pays investors a monthly dividend of $0.043 per share, indicating a tasty dividend yield of 3.2%. These payouts have more than doubled since April 2013.
What’s next for Savaria stock and investors?
Savaria remains a top bet right now for several reasons. First, COVID-19 emphasized the desire held by the aging population, who maintained they would like to stay at home compared to an old age facility. Devices such as stairlifts and home accessibility equipment can help people age at home.
Moreover, the long-term-care market is forecast to grow by 6% annually through 2030. More than 24 million people in the U.S. will require long-term care by the end of the forecast period. So, sales of home care products, including ceiling lifts, should move higher, allowing Savaria to move the needle in terms of top-line growth.
Primarily driven by the acquisition of Handicare, Savaria increased sales from $354.5 million in 2020 to $789 million in 2022. Its adjusted earnings before interest, tax, depreciation, and amortization also doubled from $59.8 million to $120 million in this period. Savaria now aims to end 2025 with more than $1 billion in sales.
Priced at 1.2 times forward sales and 21 times forward earnings, Savaria is reasonably valued. Analysts tracking the TSX stock remain bullish and expect it to surge over 30% in the next 12 months.
