In the last 10 years, the TSX index has returned 84% to shareholders. However, if we adjust for dividend reinvestments, cumulative returns are closer to 150%. While the broader markets have helped you generate inflation-beating returns, investing in quality, undervalued stocks can help you deliver outsized gains over time.
In this article, I have identified one such undervalued TSX dividend stock that you can buy right now and potentially outperform the TSX index. Let’s dive deeper.
Is this mid-cap TSX stock a good buy?
Valued at a market cap of $5.4 billion, Brookfield Business Partners (TSX:BBU.UN) is a global business services and industrial company. It owns and operates high-quality providers of essential products and services across the industrial, infrastructure services, and business services sectors.
Brookfield Business leverages its global investing and operational expertise to create value by enhancing profitability and sustainable cash flows, targeting long-term returns of 15-20%.
Brookfield focuses on large-scale market leaders with embedded growth potential, achieving this through operational improvements, and maintains a strong balance sheet with appropriate non-recourse borrowings.
The TSX stock returned over 80% to shareholders since its initial public offering in May 2016. Today, Brookfield offers a forward yield of 1% to investors and trades at a compelling valuation.
In the first quarter (Q1) of 2025, Brookfield generated over US$1.5 billion from capital-recycling initiatives while maintaining operational focus amid global market uncertainty. Its diversified portfolio of essential business services and industrial operations provided stability during a challenging period marked by tariff concerns and geopolitical tensions.
BBU executed an aggressive capital return strategy, repurchasing nearly six million units and shares worth US$140 million as part of a US$250 million buyback program launched in January.
The company significantly reduced corporate borrowings while committing US$370 million to acquire two market-leading industrial businesses, including Antylia Scientific, a manufacturer of critical lab equipment serving life sciences markets.
The Industrial segment delivered adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) of US$304 million, benefiting from US$72 million in tax benefits at Clarios, the advanced energy storage operation.
Strong demand for higher-margin advanced batteries, combined with ongoing optimization initiatives, drove performance in Q1. At the same time, the engineered components manufacturer DexKo faced volume headwinds in international markets but maintained margins through effective cost management.
Business Services generated US$213 million in adjusted EBITDA, with substantial contributions from the residential mortgage insurer Sagen and improved project execution at construction operations. However, dealer software provider CDK continued experiencing customer churn, particularly among single-product users, while investing heavily in technology modernization initiatives.
Infrastructure Services derived US$104 million in adjusted EBITDA, down from prior year levels, primarily due to the sale of offshore oil services shuttle tanker operations.
What’s next for the TSX stock?
Management conducted comprehensive assessments of potential tariff impacts across the portfolio. Brookfield explained that most businesses should experience limited exposure due to their regional sourcing and manufacturing footprints.
Clarios benefits from USMCA (United States-Mexico-Canada Agreement) exemptions for its Mexico-U.S. operations, while DexKo faces some exposure to Chinese imports but maintains competitive advantages through its diversified supply chain.
With US$2.3 billion in corporate liquidity, BBU remains well-positioned to capitalize on market dislocations while continuing strategic investments.
Its focus on relocalization and digitalization trends aligns with policy shifts favouring domestic manufacturing capabilities and supply chain resilience. Management emphasized that periods of uncertainty historically present the best investment opportunities for the firm.
BBU’s operational expertise, global presence with local capabilities, and strong balance sheet provide flexibility to navigate challenging conditions while pursuing value-creation initiatives across its portfolio of market-leading businesses serving essential end markets.
Analysts remain bullish on the TSX dividend stock and expect it to gain approximately 20% over the next 12 months, based on consensus price targets.
