Investing in high-quality stocks that trade at a reasonable valuation is a proven strategy for generating market-beating returns. In this article, I have identified one such dividend-paying TSX stock you can buy and hold right now with just $500.
Valued at a market cap of $1.23 billion, Trican Well Service (TSX: TCW) is a TSX dividend stock that has surged over 400% in the last five years. Despite its outsized returns, it also pays shareholders a tasty dividend yield of 3.7%.
Trican Well Service provides equipment, products, and technology for oil and gas well operations across Canada. It offers cementing solutions for various well types, hydraulic fracturing services including specialized fluids and additives, coiled tubing services for milling and production enhancement, and acidizing treatments to restore well performance.
Trican serves the drilling, completion, stimulation, and reworking phases of oil and gas development while also selling chemical products to the industry.
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Is this TSX stock a good buy right now?
Trican Well Service delivered solid second-quarter results that exceeded expectations. In the June quarter, it reported revenue of $213.8 million, with adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) of $45 million, indicating a margin of 21%, up from 19% in the same quarter last year. The Canadian oilfield services company generated positive earnings of $19.5 million or $0.11 per share and reported strong free cash flow of $24.4 million in the second quarter (Q2).
Despite facing some pricing pressure due to historically low natural gas prices, Trican maintained solid margins through cost management initiatives. The removal of carbon taxes and increased internal trucking helped offset cost increases in areas like cement pricing. The company’s focus on the Montney, Duvernay, and Deep Basin plays continues to drive performance across all three business divisions.
Trican announced plans to deploy a 100% natural gas-powered fracturing spread by next year, totalling $40 million in capital investment for an eighth incremental spread. This technology advancement aligns with its strategy to reduce customer completion costs while improving environmental performance.
Management expressed optimism about near-term prospects as LNG Canada ramps up to two billion cubic feet per day of exports, which should offer support for natural gas pricing. Several customers have already begun discussions about next year’s equipment availability and completion programs, providing strong visibility into the future.
Is the dividend stock still undervalued?
Analysts tracking the TSX stock forecast adjusted earnings to grow from $0.54 per share in 2024 to $0.80 per share in 2027. In this period, free cash flow is estimated to increase from $137 million to $178.5 million.
Given an annual dividend of $0.21 per share in 2025, Trican’s dividend expense is close to $45 million, indicating a payout ratio of less than 40%. Wall Street expects the TSX dividend stock to raise its payout to $0.24 per share due to a widening cash flow base.
Currently, Trican stock trades at a forward price-to-earnings multiple of 9.6 times, which is reasonable. If it continues to trade at a similar multiple, Trican should be priced at $7.7 per share in early 2027, indicating an upside potential of 33% from current levels. If we adjust for dividends, cumulative returns could be closer to 40% over the next 18 months.
