Dividend-paying companies with robust balance sheets and strong fundamentals offer you an opportunity to get more bang for your buck. Typically, quality dividend stocks have sustainable payout ratios allowing them to reinvest in organic growth, lower their debt profile and pursue accretive acquisitions, all of which should drive future cash flows higher and result in consistent dividend raises.
Here are three such undervalued Canadian dividend stocks you can consider buying right now.
Softchoice stock
TSX tech stock Softchoice (TSX: SFTC) pays investors an annual dividend of $0.44 per share, translating to a dividend yield of 2.6%. Since December 2021, its quarterly dividends have increased by 57%, despite a sluggish macro environment.
Priced at 16.4 times forward earnings, SFTC stock is expected to widen its profit margins by 20% annually in the next five years. Though its revenue is forecast to rise by less than 3% to $1.3 billion, analysts expect it to expand by almost 9% to $1.4 billion in 2024.
A software-focused IT solutions provider, Softchoice aims to accelerate the digital transformation efforts of enterprises. With an addressable market of $300 billion, the Canadian tech stock has enough room to expand its top line in the upcoming decade.
Softchoice ended 2022 with a revenue retention rate of 106%, which meant existing customers increased spending on its platform by 6% in the last 12 months. The TSX stock is currently priced at a discount of 16.5% to consensus price target estimates.
Goeasy stock
Goeasy (TSX: GSY) operates in the financial lending space and currently offers shareholders a tasty dividend yield of 3.4%. GSY stock has created massive wealth for investors, returning a whopping 1,400% in the last decade after adjusting for dividends. Despite its outsized gains, the TSX stock is priced at 8 times forward earnings, which is very cheap.
While the lending environment remains sluggish, Goeasy increased loan originations by 29% year over year to $616 million in Q1 of 2023. This increase was driven by solid demand across the company’s business lines. They include unsecured lending, point-of-sale lending, home equity loans, and auto financing.
The prime lender’s gross consumer loan receivable portfolio stood at $3 billion at the end of Q1, an increase of 39% year over year. This enabled Goeasy to increase sales by a healthy 24% to $287 million in the March quarter.
Due to stellar growth metrics and a compelling valuation, GSY stock is priced at a discount of almost 50% to consensus price target estimates.
Brookfield Infrastructure stock
The final TSX stock on my list is Brookfield Infrastructure (TSX: BIP.UN), which currently yields 4.2%. Equipped with a diversified portfolio of cash-generating assets, Brookfield Infrastructure has returned around 1,300% to investors since its IPO (initial public offering) in 2008.
The diversified TSX company increased funds from operations or FFO by 12% to US$554 million in Q1 of 2023, showcasing the resiliency of its cash flows. It remains on track to earn US$2 billion via capital recycling initiatives, which in turn can be deployed in other growth verticals.
BIP has increased dividends for 14 consecutive years and expects to increase these distributions between 5% and 9% each year going forward.
