When it comes to real estate stocks in Canada, especially if you are buying for dividends, real estate investment trusts (REITs) usually garner the most investor attraction. But Canada is home to many other promising real estate stocks, and FirstService (TSX:FSV) is foremost among them.
The discounted growth stock
The stock is currently trading at a 10% discount from its 2021 peak. The discount was quite hefty in 2022, but the stock has been on a recovery journey for a couple of years and has grown 17% in the last 12 months alone. Considering its growth pace, it’s highly likely that the stock will keep growing until it reaches the peak it fell from.
The discount itself may not seem quite attractive, and realistically speaking, a much better time to buy the company would have been two years ago when it hit the depths of its slump. But even if you missed the chance, then you can still capitalize on at least part of the recovery journey. Its fundamental strengths alone are enough to make it a compelling addition to your portfolio.
The company
FirstService is the largest property manager in Canada, with over 9,000 residential communities in its portfolio, including 3,800 high-rise condos. The number of individual housing units that fall under FirstService’s purview is massive and represents a significant segment of the total industry (for one company), but there is still a lot of room for growth.
The bulk of this portfolio is in the U.S., which shields the company from headwinds in the local real estate sector.
That’s just one-half of the company’s business. The other half is a range of real estate services that complement its property management business. It’s also a financially healthy company and has grown its revenues by over 19% annually over the course of the last 25 years.
While its growth takes most of the limelight, FirstService is also a reliable Dividend Aristocrat that has grown its payouts for 10 consecutive years.
It’s currently offering a yield of 0.61%, which may not seem very attractive, but considering the payout ratio of 40%, they are rock solid (financially). The dividend growth itself is also quite attractive, as the company raised its payouts by 66.7% in the last five years.
Foolish takeaway
If history is any indication, the bull market phase of the stock will continue for years to come, and if it continues to grow this way, the stock can emerge as a powerful addition to your Tax-Free Savings Account and Registered Retirement Savings Plan portfolio. If you don’t want to cash out the dividends, reinvesting them can give your stake in the company a little more boost.
