1 Dividend Stock With a 4.1% Yield to Buy Over Air Canada Stock Right Now

Although Air Canada stock appears to be cheap, this impressive dividend stock offers much more value for investors today.

| More on:
A worker drinks out of a mug in an office.

Source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

There’s no question that ever since the pandemic began, one of the most popular stocks on the TSX has been Air Canada (TSX:AC), Canada’s flag carrier airline.

Before the pandemic hit, Air Canada traded at more than $50 a share. Meanwhile, today it’s trading at less than half that, so it’s no surprise why the stock has been so popular, as it appears to be cheap, and investors continue to wait for the airline to recover.

Created with Highcharts 11.4.3Air Canada PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.ca

With the travel sector rebounding rapidly, many investors believe it should only be a matter of time before Air Canada follows suit.

However, although Air Canada stock appears to be much cheaper than it used to be based on its share price, when you account for all the debt it took on through the pandemic and look at its enterprise value, it’s clear the stock is not as cheap as many believe.

At the end of 2019, just prior to the pandemic, Air Canada had a market cap of roughly $12.8 billion and net debt of roughly $3.5 billion for a total enterprise value of $16.3 billion.

But when the pandemic hit, Air Canada was severely impacted and needed to issue billions in debt as well as dilute shareholders just to raise enough cash to weather the storm.

Fast forward to today, while its share price and, therefore, its market cap is much lower, at just $8.1 billion, its net debt has ballooned to over $7.5 billion, more than double what it was at the end of 2019.

So, although its market cap is down by roughly 37%, and its share price is down more than 50%, its enterprise value is only down by 4%, at roughly $15.7 billion.

Therefore, while Air Canada stock and the entire airline industry are rapidly recovering from the pandemic, the stock is not as cheap as it may appear at first glance.

That’s why rather than buying Air Canada stock today, one stock to buy instead that offers much more value, growth potential, and income in both the near term and longer term is Granite REIT (TSX:GRT.UN).

Why I’d buy this real estate stock over Air Canada

In addition to the fact that Air Canada stock is not as cheap as it looks, and on top of the fact that it could face headwinds in the near term if the economic environment continues to worsen, Granite REIT is one of the best stocks to buy now due to its attractive business model and the value it offers investors today.

Industrial real estate investment trusts (REITs) are some of the best real estate stocks to invest in right now, as they are highly defensive, make for great dividend stocks and have plenty of growth potential.

In fact, demand for industrial real estate, such as warehouses, continues to grow. And in recent years, that demand has been outpacing new supply, pushing rents higher and helping Granite to see a significant uptick in profitability.

Therefore, the REIT continues to have plenty of growth potential as rents turn over, its development pipeline continues to progress, allowing new assets to come online, and with opportunities to make value-accretive acquisitions.

Furthermore, given its wide range of tenants and its properties diversified across North America as well as parts of Europe, the REIT is highly reliable and defensive, making it ideal for this economic environment.

So, with Granite now offering a dividend yield of roughly 4.1%, and with the REIT having a dividend-growth streak of 12 years, it’s an ideal stock to buy now.

Plus, if you buy the stock today, you can gain exposure while it trades at a forward price-to-funds from operations ratio of 15.2 times, below its three- and five-year averages of 19 times and 18.1 times, respectively.

Therefore, although Air Canada looks like a top value stock to buy now, Granite is a much better investment to buy today.

Should you invest $1,000 in Air Canada right now?

Before you buy stock in Air Canada, consider this:

The Motley Fool Stock Advisor Canada analyst team just identified what they believe are the Top Stocks for 2025 and Beyond for investors to buy now… and Air Canada wasn’t one of them. The Top Stocks that made the cut could potentially produce monster returns in the coming years.

Consider MercadoLibre, which we first recommended on January 8, 2014 ... if you invested $1,000 in the “eBay of Latin America” at the time of our recommendation, you’d have $20,697.16!*

Stock Advisor Canada provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month – one from Canada and one from the U.S. The Stock Advisor Canada service has outperformed the return of S&P/TSX Composite Index by 29 percentage points since 2013*.

See the Top Stocks * Returns as of 3/20/25

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 Daniel Da Costa has no position in any of the stocks mentioned. The Motley Fool recommends Granite Real Estate Investment Trust. The Motley Fool has a disclosure policy.

Confidently Navigate Market Volatility: Claim Your Free Report!

Feeling uneasy about the ups and downs of the stock market lately? You’re not alone. At The Motley Fool Canada, we get it — and we’re here to help. We’ve crafted an essential guide designed to help you through these uncertain times: "5-Step Checklist: How to Prepare Your Portfolio for Volatility."

Don't miss out on this opportunity for peace of mind. Just click below to learn how to receive your complimentary report today!

Get Our Free Report Today

More on Dividend Stocks

Asset Management
Dividend Stocks

How I’d Allocate $10,000 in 2 Canadian Growth Stocks for the Long Run

Both growth stocks offer a compelling mix of income, growth, and value, and I believe they can outperform over the…

Read more »

grow money, wealth build
Dividend Stocks

2 Dividend-Growth Stocks to Buy on the Pullback

These stocks have increased their dividends annually for decades.

Read more »

Electricity transmission towers with orange glowing wires against night sky
Dividend Stocks

BCE Stock Analysis: A Smart Choice for Potential Value and Income

BCE stock has slipped to its June 2009 level amid Trump tariff uncertainty and intensity. Does the sharp dip provide…

Read more »

Person slides down a stair handrail
Dividend Stocks

Should You Buy Cargojet Stock at $70?

Cargojet stock might be down, but don't let that scare you off. It's still a long-term opportunity.

Read more »

Middle aged man drinks coffee
Dividend Stocks

3 Monthly Dividend Stocks to Buy and Hold Forever

Add these three TSX dividend stocks to your self-directed portfolio for reliable monthly passive income.

Read more »

Hourglass projecting a dollar sign as shadow
Dividend Stocks

How I’d Build an Income Portfolio With 3 TSX Stocks Paying Monthly Dividends

Focusing on these three monthly paying TSX dividend stocks can help you reinvest more frequently, enhancing overall returns.

Read more »

Dividend Stocks

How I’d Divide $15,000 Across My Top 3 TSX Stock Picks for Growth and Income

Got $15,000? Here are three TSX stocks that could provide ample dividend and capital returns in the coming years ahead.

Read more »

concept of real estate evaluation
Dividend Stocks

Canadian Real Estate Stocks: How I’d Navigate This Sector With $15,000 During The Pullback

A $15,000 investment split among these two undervalued Canadian defensive REITs could generate high income yields with capital gains upside

Read more »