When you’re considering a Canadian stock that’s down, but could produce decades of income, the key isn’t whether it bounces next quarter. Instead, it’s whether it earns its way back while paying you to wait. The best long-term income opportunities often look uncomfortable in the short term, but there’s a fine line between “temporarily beaten up” and “structurally broken.” The goal is to tell those apart. That’s why today we’re going to look at what to consider before buying what could be an oversold Canadian stock and one that could be a solid buy.
What to watch
Let’s start with why it’s down. A short-term sell-off from weak markets, temporary cost pressures, or cyclical slowdown can create opportunity. But if the problem is permanent, that’s a trap, not a discount. Next, test dividend strength, not just size. A big yield looks great until it gets cut. Check the payout ratio, or how much of earnings or free cash flow goes to dividends. Under 70% of normalized cash flow is usually comfortable for a steady business.
Then, look at free cash flow trends. A trustworthy income stock must generate consistent surplus cash after maintenance spending. Free cash flow (FCF) should cover dividends with room to reinvest. And don’t ignore debt. A Canadian stock under stress that’s also overleveraged can’t prioritize you as a shareholder. Look for debt-to-earnings before interest, taxes, depreciation and amortization (EBITDA) under three times, and interest coverage comfortably above four times. The lower the debt load, the less risk of a dividend cut when rates rise.
Now, valuation matters, but only after quality. A low price-to-earnings (P/E) ratio or high yield aren’t enough; you want both earnings power and resilience. Compare its multiples to peers and its own 10-year average. If it’s cheaper than normal while the business model still works, that’s a good sign. If it’s cheap because profits have collapsed, it might stay that way.
Consider FSZ
Fiera Capital (TSX: FSZ) is exactly the kind of Canadian stock long-term income investors notice when it’s down big, because its drop looks emotional, not existential. The Canadian stock’s business is steady at its core of managing money. That means recurring fees, predictable cash flow, and high operating leverage when markets recover. So when its share price sinks, now down 33% in the last year, it starts to look less like a value trap and more like an opportunity for decades of income.
Fiera is one of Canada’s larger independent asset managers, overseeing roughly $155 billion in assets across equities, fixed income, private credit, and real assets. It earns management and performance fees from institutions, pension funds, and wealthy clients. Its challenge is that when markets fall or investors pull money, those fees shrink fast. That’s been the story behind its slide.
But where it shines is through its dividend. The Canadian stock offers a yield at 7.2% at writing, though with a very high payout ratio. Even so, the Canadian stock has paid a dividend every year since listing in 2010 and has rarely cut, preferring to right-size operations instead. What’s more, it looks cheap trading at about 7 times future earnings and an enterprise value over EBITDA of 9. These are discounts showing further value is likely on the way.
Bottom line
Now, the Canadian stock isn’t without risks. These are tied to performance fees, capital markets volatility, and the mix of debt and acquisitions as Fiera buys smaller managers. This brings along integration risks. Yet for patient investors wanting compounding returns long term, Fiera stock fits perfectly into an oversold dividend stock looking for a rebound. Especially at these levels.
