When it comes to dividend stocks in Canada, BCE (TSX:BCE) often takes centre stage. However, there’s a mid-cap contender that’s been making waves and might just deserve a spot in your portfolio. And that’s goeasy (TSX:GSY). Let’s dive into why goeasy could be a compelling choice over BCE stock right now.
The numbers
BCE stock’s fourth-quarter results for 2024 showed a slight dip in operating revenues, down 0.8% to $6.42 billion compared to the same period in 2023. On the bright side, net earnings increased by 16.1% to $505 million. Plus, net earnings attributable to common shareholders rose by 20.7% to $461 million. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) also saw a modest uptick of 1.5%, reaching $2.6 billion.
In contrast, goeasy reported record-breaking numbers in its third quarter of 2024. The company achieved $839 million in loan originations, marking a 16% increase from the previous year. This surge led to a 19% rise in revenue, totalling $383 million for the quarter. Operating income also saw a significant boost, climbing 26% to $160 million.
BCE stock is renowned for its generous dividends, boasting a forward annual dividend rate of $3.99 per share. This translates to a yield of approximately 12% at writing. However, it’s worth noting that the company’s payout ratio stands at a staggering 4,400%. This could raise sustainability concerns.
On the other hand, goeasy offers a forward annual dividend rate of $4.68 per share, yielding around 2.76%. While the yield is lower than BCE stock’s, goeasy’s payout ratio is a more conservative 27.26%, suggesting a more sustainable approach to dividend distributions.
The future
BCE stock’s growth appears to be stabilizing, with a slight decline in operating revenues and modest gains in net earnings. The company faces challenges in the competitive telecommunications sector, which could impact its future growth prospects.
However, goeasy stock is on a robust growth path. The company’s loan portfolio expanded by 28% year over year, reaching $4.39 billion. This growth is driven by increased loan originations and a diversified product offering, positioning goeasy for continued expansion in the non-prime lending market.
Looking ahead, BCE stock has set its 2025 financial guidance amidst an uncertain macroeconomic and regulatory environment. The company acknowledges ongoing competitive pricing pressures but remains optimistic about growth opportunities in fibre, 5G wireless services, and digital subscriptions.
Meanwhile, goeasy’s future appears promising, with the company maintaining stable credit and payment performance. The proportion of secured loans has increased to 45%, and the net charge-off rate remains within the forecasted range. These factors, coupled with enhancements to credit models and underwriting practices, position goeasy well for sustained growth.
Foolish takeaway
So, where does that leave investors? While BCE stock offers an attractive dividend yield, its high payout ratio and modest growth may give some investors pause. Then there’s goeasy, with its impressive growth metrics, sustainable dividend payouts, and strategic positioning in the non-prime lending market. The stock presents a compelling alternative for those seeking both income and growth potential in their investment portfolios.
