1 Magnificent TSX Dividend Stock Down 13% to Buy and Hold Forever

This dividend stock is down 13% as of writing, marking a significant opportunity for those seeking out income and value in today’s market.

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Can a falling dividend stock really be an incredible opportunity? Often, it depends on the context. When a stock with a solid track record and bright future declines due to short-term challenges, it might be a golden buying chance.

Yet throw in an attractive dividend and endorsement from a respected investor, and you have a potential gem for your portfolio. That’s why today we’re delving into Great West Lifeco (TSX:GWO) on the TSX today. And why it could be an excellent long-term investment.

Watsa wager

GWO stock is highly regarded by renowned investor Prem Watsa, often called the “Canadian Warren Buffett.” Watsa’s Fairfax Financial Holdings is known for its strategic investments and has a substantial stake in GWO stock. This endorsement speaks volumes about the company’s potential. 

GWO stock boasts a diversified business model and plays a critical role in the financial services industry. It has robust cash reserves and multiple revenue streams, ranging from life insurance to investment services.

All this speaks to why Watsa has identified the stock as a strong investment. Watsa values companies with robust financial health, and GWO stock fits this criterion well. The company has a solid balance sheet, with significant cash reserves and manageable debt levels. This financial strength enables the company to weather economic uncertainties and invest in growth opportunities.

What’s more, GWO stock has a history of paying and increasing dividends, which is a key attraction for income-focused investors like Watsa. The reliable dividend growth demonstrates the company’s profitability and commitment to returning value to shareholders. Watsa favours companies that can generate consistent cash flow and reward their investors.

Alright, so why is it down?

With all this positivity about the valuable stock, why is GWO stock down right now? Despite its strengths, GWO stock is down about 13% as of writing from 52-week highs. This decline is primarily due to external economic factors. Rising interest rates and inflationary pressures have impacted the broader financial sector, including GWO stock. Higher interest rates can lead to reduced demand for new policies and increased costs for the company.

However, these challenges are part of a cyclical economic environment. As interest rates stabilize, GWO stock’s well-managed operations and diverse offerings are expected to shine. The company’s strong fundamentals suggest that its stock is currently undervalued, presenting a potential buying opportunity.

Notably, GWO stock has shown resilience amidst these challenges. The global financial services firm continues to expand its customer base and increase its market share. For instance, it reported significant growth in its asset management division and added numerous new policies across different segments. 

Cost management has also been a highlight. The company has managed to keep its expenses in check despite inflation, demonstrating effective operational efficiency. This has led to strong net income performance, which bodes well for future growth.

Buy for value, stay for a dividend

Then, of course, there’s the strong dividend. One of the standout features of GWO stock is its dividend. Currently yielding 5.64%, it has a history of steady increases, making it an attractive option for income-focused investors. The company’s solid financial position ensures that it can maintain and potentially grow its dividend, even in challenging economic times.

Altogether, this magnificent dividend stock looks like a stellar buy – one backed by a solid long-term wager from Watsa, with even more growth to come.

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 Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Fairfax Financial. The Motley Fool has a disclosure policy.

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