Investing in beaten-down dividend stocks allows you to benefit from a higher yield and potential capital gains when market sentiment recovers.
As dividends are not guaranteed, it’s essential to identify companies that are fundamentally strong and have showcased an ability to maintain their payouts across business cycles.
In this article, I have identified one undervalued TSX stock that offers you a forward yield of 1%. Down 67% from all-time highs, Pollard Banknote (TSX:PBL) sells lottery and charitable gaming products globally, including instant tickets, pull-tab tickets, and bingo paper. The company offers digital gaming solutions, including eInstants and iLottery platforms, vending machines, loyalty programs, and lottery management services.
Despite the ongoing drawdown, the TSX stock has more than tripled shareholder returns over the past decade. Here’s why I’m bullish on this small-cap stock right now.
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Is this TSX dividend stock a good buy?
Pollard Banknote delivered solid second-quarter results, showcasing the diversification and resilience of its business model. In the quarter ended in June, it reported combined revenue of $174.8 million, which includes sales from the NeoPollard joint venture.
The standout performer remains the NeoPollard Interactive joint venture, which has posted record results for the second consecutive quarter.
Strong electronic instant ticket sales in Virginia and North Carolina drove the exceptional performance, as the joint venture contributed $17.7 million in income compared to $14.1 million in the prior year period. These long-term contracts are generating meaningful cash flow that is expected to continue into the upcoming decade.
Management remains focused on improving instant ticket margins through strategic pricing and operational efficiency initiatives. While physical ticket volumes remained steady, average selling prices increased significantly, reflecting the impact of repriced contracts that now cover roughly 75% of the business. The company is focusing on higher-margin sales rather than lower-value volume, which should drive profit margins higher.
Pollard successfully expanded its charitable gaming footprint through the Pacific Gaming acquisition, adding handheld electronic bingo devices to complement its purchase of bingo dauber manufacturer CJ Venne last year.
Revenue synergies are on track as the company cross-sells printed products alongside electronic solutions, creating a comprehensive suite of offerings for the charitable gaming market.
The Kansas iLottery operation completed its first full quarter and continues to meet expectations as the player base builds. Multiple formal requests for proposals remain active, including opportunities in Massachusetts and Belgium, as lotteries increasingly recognize iLottery as critical for long-term success.
Looking ahead, management expects significantly higher instant ticket volumes in the third quarter, as customer orders that were previously shifted from earlier periods are now flowing through production schedules.
Is the TSX stock undervalued?
Pollard Banknote has increased sales from $246.4 million in 2016 to $557 million in 2024. Analysts forecast the top line to increase to $640 million in 2027. Moreover, adjusted earnings are forecast to expand from $1.47 per share in 2024 to $2.39 per share in 2026.
Bay Street also estimates free cash flow to increase from $48.36 million in 2024 to $69 million in 2026. Given an annual dividend of $0.20 per share, Pollard Banknote ended 2024 with a payout ratio of just over 20% which is not too high. Its payout ratio is expected to decline to 8% by 2026.
In November 2025, the TSX stock trades at a forward price-to-earnings multiple of 10 times, which is below the historical average of 21.5 times. If Pollard Banknote trades at 15 times forward earnings, it could gain 75% over the next 12 months.
