Evaluating dividend stocks is far easier than growth stocks because while growth may be impacted by a wide range of macro factors like market dynamics and investor sentiment, dividend stocks may have a relatively minor set of evaluation factors. You mostly have to focus on the financial health of the dividend payers to ensure that they can maintain their outputs, offering you consistent dividend-based returns.
That doesn’t mean dividend stocks are immune to macro elements. They are vulnerable to a wide range of market forces. Still, you can reduce these vulnerabilities by sticking to relatively safer dividend stocks, such as aristocrats with long histories of dividend growth.
One such aristocrat is goeasy (TSX:GSY). Although it’s one of the newcomers in the group (since its dividend-growth streak is just eight years), the magnitude of its dividend increases makes it highly lucrative.
goeasy dividends
Ironically, dividends are usually not the first thing most investors of goeasy look into. It’s one of the most compelling growth stocks in the financial sector that has returned 266% to its investors in the last five years through price appreciation alone. The number jumps to 320% if you also add in the dividends.
Another reason its dividend prowess is often overlooked is the yield. Thanks to its rapid growth, the yield usually remains low. However, the company has grown its dividends quite generously in the past. It continues to do so, making its yield far more attractive than growth stocks offering similar returns. The yield is currently 2.7%.
If you look at the other end of the spectrum — i.e., the most compelling reasons to buy goeasy for its dividends, payout growth, and financial sustainability are the reasons. Its payout ratio has remained even safer compared to bank stocks in Canada, which are among the safest financial institutions globally. At its highest, the payout ratio in the last 10 years reached 43%.
Then there is the dividend growth. For the first quarterly dividends of the year, the company has announced payouts of about $1.1700 per share. This is a 21.8% increase from last year’s $0.96 per share payout. Most aristocrats achieve that kind of growth over four to six years.
goeasy stock
Both dividends and growth potential make goeasy a dreamy pick. The business also has healthy financials and a massive national reach. It has achieved significant organic growth over the years and has helped hundreds of thousands of Canadians improve their financial standing and credit score enough to qualify for prime rates.
Its position as one of Canada’s largest alternative financial institutions that cater to a massive, underserved market (people with poor credit) makes it a healthy long-term pick.
Foolish takeaway
While the stock has made ample headway when coming out of its bear market phase, it’s still modestly discounted. This allows investors to lock in a good yield while riding the recovery momentum to new capital-appreciation heights.
