With 5.56% Yield, This Canadian Stock Is a Must-Buy

A Canadian stock is a must-buy for its standout performance and high dividend yield.

December 2024 was a merry month for the S&P/TSX Composite Index because it hit two new records. Canada’s primary stock index reached an all-time of 25,691.80 on the 6th, followed by an intraday record high of 25,843.20 on the 9th. As of Christmas Eve, the year-to-date gain is 18.55%.

However, the records could be sweeter if all 11 primary sectors have positive returns. Only the communications services sector is in the red, down 21.02% thus far approaching year-end. Telco giants BCE, TELUS, and Rogers Communications pulled down the sector due to their year-long slump.

An exception to the sector’s dismal showing is Cogeco Communications (TSX: CCA). At $66.14 per share, the mid-cap telco stock is up by +17.86% year to date and outperforms seven TSX primary sectors. Given its standout performance and lucrative 5.56% dividend yield, CCA is a must-buy for income-focused investors.

stock research, analyze data

Image source: Getty Images

Corporate structure

Cogeco Communications is the communications arm of Cogeco Inc. The $2.78 billion telecommunications provider operates through three subsidiaries: two in Canada (Cogeco and Oxio under Cogeco Connexion) and one in the U.S. (Breezeline under Cogeco US).

Connexion is the second-largest cable operator in Ontario and Québec. The subsidiary provides residential and small business customers with Internet, video and telephony services via its two-way broadband cable networks. Breezeline, the eighth-largest cable operator provider in the U.S., provides the same services and serves residential and business customers in 13 states.

Cogeco Communications is small compared to the industry giants but enjoys a unique advantage. Its competitive advantage is its significant presence in both Canada and the United States. The growth strategy focuses on growing its footprint through network expansion, increased digitization, and launching Mobile Services using a capital-efficient model.

Fiscal 2024 financial results

In fiscal 2024 (12 months ending August 31, 2024), revenue and profit declined 0.3% and 15.3% year over year to $2.97 billion and $354.13 million, while free cash flow (FCF) rose 13.9% to $476 million from a year ago. Its president and chief executive officer, Frédéric Perron, said, “Fiscal 2024 has been a year of tremendous progress for Cogeco.”

“Our Canadian telecommunications business continued to perform well in Q4, driven by growth of our Internet subscriber base through Cogeco Connexion, oxio, and our network expansion program,” he added. The Oxio brand’s digital model is a growth engine.

Perron says the recent company restructuring, the first phase of a three-year program, has simplified the operating model. He believes Cogeco is well-positioned to accelerate its digital capabilities and drive bundling across wireline and wireless. Optimizing operations for growth and value creation are ongoing concerns.

Business outlook 

The Q1 fiscal 2025 results won’t be available until January 13, 2025. However, Cogeco Communications said the coming fiscal year is the first year of a three-year transformation program. Management expects the company’s investments to set the path to sustainable growth. It forecasts revenue to remain stable due to Internet subscriber growth, although lower video and wireline phone subscriptions.

Market analysts’ 12-month average price target for CCA is $79.25, a 20% potential upside. Prospective investors can earn in two ways: price appreciation and dividends. The overall return should be higher to include the 5.56% yield.

Fool contributor Christopher Liew has no position in any of the stocks mentioned. The Motley Fool recommends Cogeco Communications, Rogers Communications, and TELUS. The Motley Fool has a disclosure policy.

More on Dividend Stocks

Happy golf player walks the course
Dividend Stocks

2 TSX Dividend Stocks to Consider Now for Steady Passive Income

With established business models, reliable cash flows, a strong dividend track record, and clear growth prospects, these two stocks stand…

Read more »

people ride a downhill dip on a roller coaster
Dividend Stocks

Why I’m Holding This Dividend Stock Through Market Volatility

Worried about another market decline? Buy Fortis stock for a stable income stream and steady returns over the coming years.

Read more »

A worker gives a business presentation.
Dividend Stocks

Worried About the Economy? Waiting to Invest Could Actually Cost You More

Investing in Canada’s top dividend-paying stocks can calm investors’ fear of economic uncertainty.

Read more »

man shops in a drugstore
Dividend Stocks

TFSA vs. RRSP: Where I’d Put the Next $500 for Retirement

The next $500 can work harder when the account fits your tax situation, with Metro offering a fresh retirement-stock example.

Read more »

shoppers in an indoor mall
Dividend Stocks

A Perfect TFSA Stock: A 6.7% Payout Each Month

This Canadian stock offers a 6.7% annualized yield with monthly distributions, backed by strong retail occupancy and ongoing property developments,…

Read more »

A train passes Morant's curve in Banff National Park in the Canadian Rockies.
Dividend Stocks

2 Dividend Stocks I’d Happily Buy and Hold for Life

CN Rail (TSX:CNR) and another name that could be worth holding onto for decades or perhaps for a lifetime.

Read more »

senior relaxes in hammock with e-book
Dividend Stocks

3 TFSA Stocks for Worry-Free Passive Income

With their consistent cash flows, strong dividend payment histories, and promising growth prospects, these three Canadian dividend stocks offer compelling…

Read more »

Close up of an egg in a nest of twigs on grass with RRSP written on it symbolizing a RRSP contribution.
Dividend Stocks

The RRSP Deadline Is in March: Why Starting in November Gives You the Advantage

Many investors hold stocks like Shopify Inc (TSX:SHOP) in their RRSPs.

Read more »