1 Dividend Stock Down 27% to Buy Right Now

goeasy is an undervalued TSX dividend stock trading at a massive discount to consensus estimates in 2024.

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While tech stocks have staged a stellar comeback in the past 15 months, companies part of sectors such as financial services, real estate, industrials, and utilities have trailed the broader markets.

Investors are worried about macro headwinds such as higher interest rates to negatively impact lending companies in the near term. Generally, when interest rates rise, the demand for loans declines. Further, delinquency rates also move higher, resulting in a slowdown of revenue and earnings.

One TSX stock part of the financial lending sector is goeasy (TSX:GSY). Valued at $2.7 billion by market cap, goeasy stock trades 27% below all-time highs, allowing you to buy the dip and benefit from a forward yield of almost 3%.

Let’s see why goeasy stock is a good buy right now.

The bull case for goeasy stock

goeasy is a Canada-based entity that provides non-prime leasing and lending services through brands such as easyhome, easyfinancial, and LendCare. The company offers a variety of financial products and services, including unsecured and secured installment loans and merchant financing. Moreover, customers can transact easily through an omnichannel model that includes mobile and online platforms in 400 Canadian locations. To date, goeasy has acquired and served 1.3 million Canadians, originating close to $13 billion in loans.

In the fourth quarter (Q4) of 2023, goeasy generated loan originations of $705 million, an increase of 12% year over year. The increase in lending was driven by a record volume of credit applications, which rose 29% compared to the year-ago period.

Despite a tepid lending environment, goeasy experienced strong performance across product and acquisition channels such as unsecured lending, point-of-sale lending, and automotive financing. The increase in loan originations allowed goeasy to grow its loan portfolio by $215 million, which was at the higher end of its estimates. goeasy ended Q4 with a consumer loan portfolio of $3.65 billion, an increase of 30% year over year. Comparatively, sales rose by 24% to $338 million in the December quarter.

goeasy emphasized its experienced stable credit and payment performance in Q4 with a net charge-off rate of 8.8%, down from 9% in the year-ago quarter. A stable credit performance reflected an improved credit and product mix of the loan portfolio.

Moreover, goeasy reported an adjusted operating income of $141 million in Q4, an increase of 41% year over year. Its adjusted operating margin stood at 41.6%, up from 36.5% in the same period in 2022. goeasy’s efficiency ratio improved by 390 basis points to 28.3%, reflecting an increase in operating leverage.

goeasy raises its dividend again

goeasy has been among the best-performing TSX stocks in the past two decades. Since March 2004, GSY stock has returned 2,000% to shareholders. After adjusting for dividends, total returns are significantly higher at 3,470%.

Despite its market-thumping gains, GSY stock offers shareholders a tasty dividend yield of 2.9%, given it pays an annual dividend of $4.68 per share. goeasy just raised its dividend by 22%, increasing the payout for the 10th consecutive year. Priced at 9.5 times forward earnings, GSY stock is really cheap and trades at a discount of 25% to consensus price target estimates.

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 Aditya Raghunath 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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