2024 was a banner year for the Canadian stock market, which surged by about 17% and delivered total returns of approximately 21%, including cash distributions. This big rally has left many investors wondering if there’s still room for value in the market. The good news is that with wise stock picking, there are still opportunities to uncover hidden gems, even after such a strong year. Let’s take a closer look at two Canadian stocks that could be poised for growth in 2025 and beyond.
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BCE: A controversial dividend play
BCE (TSX: BCE), a large Canadian telecommunications company, has been a fixture in many income portfolios due to its reliable dividends. However, recent events have cast doubt on the sustainability of its payout. For over 16 years, BCE has raised its dividend, but the company recently announced that it’s freezing its dividend in 2025. The decision came after the stock’s struggles with earnings growth and mounting pressure from competitive pricing in the communications market.
The company’s massive investment in its fibre network and belief in future growth from its 5G services, enterprise solutions, and digital advertising offer some hope. Still, BCE’s dividend payout ratio last year reached 131% of its adjusted earnings and 127% of free cash flow, signalling a red flag. In fact, the stock’s roughly 33% drop over the last 12 months, coupled with an 11.8% dividend yield, suggests that even the market is skeptical about BCE’s ability to maintain its payout.
Yet, for contrarian investors, BCE might still hold appeal as a turnaround play. The current analyst consensus gives the stock a 12-month price target of $37.09, which represents a potential upside of about 9.8% from its current price of $33.78 per share at writing. Assuming the dividend is slashed by two-thirds, the forward yield would drop to a more sustainable 3.9%, suggesting a total return of approximately 13.7% over the next year. If BCE manages to maintain its dividend, the total return could be closer to 21.6%.
goeasy: A strong performer with room to grow
While BCE is facing challenges, goeasy (TSX: GSY) is showing remarkable strength. The Canadian non-prime lender has recently reported impressive results, making it one of the most intriguing growth stories in the market today. In the fourth quarter, goeasy originated $814 million in loans, a 15% increase year over year. This growth was driven by a surge in credit applications, which were up 28% from the previous year. The company’s consumer loan portfolio increased by 26% to $4.6 billion, leading to a record revenue of $405 million — 20% higher than a year ago.
Operating income rose 20%, and adjusted earnings per share (EPS) were up 11%, showing that goeasy’s strategy is working. For the full year, the company’s adjusted EPS grew 18%, to $16.71, and management is optimistic about further gains through 2027. Notably, goeasy also announced an incredible dividend hike of 25%, signaling confidence in its business model and long-term prospects.
At $177.61 per share at writing, goeasy stock yields just under 3.3%. With analysts estimating the stock is trading at a 25% discount, it offers solid value for growth-focused investors looking for value in the financial sector.
The Foolish investor takeaway: 2 Canadian stocks with distinct value propositions
While the Canadian stock market enjoyed a significant rally in 2024, there are still stocks that present compelling value. BCE might be a controversial pick due to its dividend freeze, but it could appeal to contrarian investors seeking a potential turnaround. Meanwhile, goeasy is a strong growth story, with solid performance and promising future projections. Both stocks have distinct value propositions, making them worth considering for investors looking to balance potential risk with reward in 2025.
