The stock market has seen its fair share of volatility recently, and many investors are waiting on the sidelines to see how things unfold. However, if you have cash available and are looking for opportunities, now could be the perfect time to add undervalued stocks to your portfolio.
In particular, two dividend stocks have dropped meaningfully in price, presenting a potential buying opportunity. Both companies boast strong fundamentals and healthy dividend yields, making them excellent choices for investors seeking long-term growth and income. Here are two bargain stocks to consider while they’re still cheap.
Exchange Income: A hidden gem for dividend seekers
Exchange Income (TSX:EIF) is an under-the-radar stock that’s fallen 14% from its 52-week high, presenting a compelling buying opportunity. At $50.87 per share at writing, the stock trades at a 27% discount from the analyst consensus target price, offering significant potential upside of 37%. Beyond its attractive valuation, Exchange Income has something that many investors crave: a reliable monthly dividend yielding nearly 5.2%.
This holding company is comprised of a diverse portfolio of businesses in aerospace and aviation, and manufacturing. Its 19 subsidiaries provide essential products and services to niche markets, helping to keep its revenue stream stable. Over the past decade, the company has grown its revenue per share at a solid compound annual growth rate (CAGR) of 7.5%, while its operating cash flow per share has increased at a steady pace of 4.1%. In line with this growth, the company has increased its dividend by 4.6% per year in the period. The depressed stock price and high yield makes it an attractive idea for income-focused and long-term investors.
goeasy: A strong performer at a discounted price
Another stock worth considering is goeasy (TSX: GSY), which has fallen 27% from its 52-week high. At $150.39 per share at writing, goeasy is trading at a blended price-to-earnings (P/E) ratio of just 8.6, a significant discount of around 27% from its long-term average. Analysts suggest an even bigger bargain, with a target price that implies a 37% upside.
goeasy is a leading non-prime Canadian lender with a proven track record of profitability and shareholder returns. The company’s 10-year dividend growth rate of 30% is a testament to its solid financial performance. Recently, goeasy raised its dividend by an impressive 25%, underscoring its commitment to rewarding investors.
The company has delivered exceptional returns over the past decade, nearly 10-folding investors’ money with annualized returns above 24%. For 2024, goeasy reported revenue growth of 22% and adjusted diluted earnings per share (EPS) growth of 18%. With a return on equity (ROE) of 25% for the year, goeasy continues to generate strong returns for shareholders. Looking ahead, the company’s medium-term outlook is equally positive, with management forecasting revenue growth of approximately 11% per year through 2027, alongside steady operating margin expansion and a continued strong ROE above 23%.
Why these stocks are worth your attention
Both Exchange Income and goeasy present unique opportunities for long-term investors looking to capitalize on discounted prices. Exchange Income’s diversified business, steady cash flow growth, and attractive dividend yield make it a good consideration for income investors. Meanwhile, goeasy’s exceptional profitability, solid dividend growth, and discounted valuation make it a compelling pick for those seeking long-term capital appreciation.
With both stocks trading well below their 52-week highs, now may be the time to add them to your portfolio. While market volatility can be unsettling, these companies offer promising upside potential and strong fundamentals, making them bargains worth considering before prices rise again.
