While it has been on a recovery journey for some time now, goeasy (TSX:GSY) is still quite attractively discounted. It’s trading at a price 27% lower than its 2021 peak, even though it’s in a bull market phase. The discount is one of the reasons why its yield, which historically remained relatively low, is currently quite close to 3%. But is that enough to make it a good buy this month?
The company
goeasy is massive for an alternative financial company. Its number of branches and national footprint make it comparable to a small local bank, and it rose to this size by capturing a relatively underserved market: borrowers with low credit scores. The conventional banking industry ignores that significant population segment and is typically served by a discordant market of small lenders.
The company has captured this market and even allowed many clients to elevate their credit scores to healthy levels. However, a robust business model and a massive footprint are only some of the good things for this financial company.
The management team/insiders have confidence in the company, as evidenced by an unusually high number of insider owners: 21%. With them and institutions owning large chunks of the company, less than 60% of its shares are publicly held.
The last quarterly (and annual results) were quite encouraging as well. The company increased its annual diluted earnings per share by 23%. It also raised its payouts by a significant margin of 22%.
The stock
If we consider the long-term returns, goeasy is still one of the most promising stocks currently trading on the TSX. The overall returns in the last 10 years are roughly 1,000%, and despite the slump, the price appreciation in the previous five years alone is currently close to 270%. The recovery pace has been decent enough, and the stock has gone up about 66% in the last 12 months.
Considering this growth pace and the fact that it’s recovering, albeit not steadily, it is already a great pick, considering its former and current growth pace. But the reason it’s especially attractive right now is the combination of growth potential and dividends it’s offering.
The 3% yield may not look promising enough compared to other high-yield stocks trading on the TSX, but it’s a decent number considering the stock’s former yield.
Also, it’s one of the most generous dividend growers in Canada right now and has joined the rank of aristocrats. Buying now may allow you to get the best of both worlds: lock in a good yield (from the stock’s perspective) and capture a good part of the recovery-fueled growth.
Foolish takeaway
Considering its business model, history, and long-term potential, it’s a solid long-term pick and might do well in your Registered Retirement Savings Plan, but if you plan on leveraging its dividends for a passive-income stream, the Tax-Free Savings Account might be the right place to stash this holding.
