There’s no question that Canadian value stocks offer some of the best opportunities for investors today. With all the uncertainty in the market and so many high-quality companies trading undervalued, there’s plenty of opportunity to find stocks you can buy for the long haul.
Value stocks that also pay a dividend are ideal investments to consider right now for many reasons. First off, stocks that consistently return cash to investors are usually well-established businesses with reliable operations and strong cash flow. So, as long as the dividend looks sustainable, and there are no major red flags or ultra-high yields that could signal risk, there’s little to worry about over the long term.
Another major reason why dividend-paying value stocks are attractive in this environment is that you can start earning a return on your investment immediately.
Even if the uncertainty persists in the near term and the stock takes a few quarters to rebound, the cash flow from the dividend can provide consistent income. Plus, not only do you begin to earn a return right away, but that income you’re earning can then be reinvested immediately, helping to boost your long-term returns through compounding.
Furthermore, in uncertain environments like the one we’re in today, earning consistent cash flow while you wait for the stock to recover gives you a major advantage. Instead of sitting on cash or trying to time the market, you’re putting your money to work right away, positioning yourself to build wealth steadily over time.
So, with that in mind, here’s where I’d look to invest in Canadian value stocks for reliable passive-income potential today.
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One of the best long-term investments on the TSX
If you’re looking for Canadian value stocks to buy that can generate attractive passive income for you, then there’s no question that goeasy (TSX: GSY) is one of the best to buy now.
goeasy is a specialty finance stock that’s been one of the fastest-growing companies in Canada over the last decade.
However, while it’s predominantly a growth stock, it also pays an attractive dividend that has been growing considerably in recent years.
For example, just five years ago in 2020, goeasy was paying out $1.80 per share in annual dividends. Today, its annual dividend sits at a whopping $5.84 per share, more than triple what it was just five years ago.
Therefore, when you consider the growth potential it has, the passive income goeasy generates, and the fact that it’s trading nearly 25% off its 52-week high, it’s clear it’s one of the best Canadian value stocks to buy now.
Plus, as the stock has sold off in the current environment, the dividend yield has increased to more than 3.7%, which is a significant yield for such a high-quality growth stock.
Furthermore, there’s no question about the sustainability of the dividend. For example, in 2024, goeasy generated normalized earnings per share (EPS) of $8.04. So, with goeasy paying out $5.84 annually, it has a payout ratio of just 73%, showing why it’s one of the best Canadian value stocks that passive-income seekers can buy today.
One of the best Canadian value stocks in the retail sector
In addition to goeasy, another high-quality Canadian value stock to buy now is Canadian Tire (TSX: CTC.A).
Canadian Tire has always been a solid long-term investment due to its consistent profitability, growing dividend and long-term growth potential.
Even over the last few years, as higher inflation weighed on profitability, Canadian Tire’s dividend remained sustainable.
In fact, this year, analysts estimate Canadian Tire will generate normalized EPS of $12.82. Meanwhile, it’s paying out just $7.10 per share in annual dividends, giving it a forward payout ratio of just 55%.
And with Canadian Tire’s stock still hovering around $150 per share, it’s not just a high-quality Canadian value stock to buy; it also offers investors a yield of 4.75%.
So, if you’ve got cash you’re looking to put to work in this uncertain environment, there’s no question that Canadian Tire is one of the best value stocks to buy for passive income.
