Finding an oversold stock can be one of the smartest ways to build decades of income. It lets you lock in a strong yield and long-term upside when the market is overly pessimistic. When quality companies trade at discounted prices, dividend yields rise. That gives you a chance to earn more income for every dollar invested. If the business remains fundamentally sound, those dividends can keep growing even as the share price recovers, compounding your returns over time. So, let’s look at one dividend stock offering this and more.
Image source: Getty Images
KPT
KP Tissue (TSX: KPT) is a perfect example of how an oversold stock can still be a powerful long-term income play. While the share price has slipped in recent years, the dividend stock’s fundamentals remain solid.
KPT owns a significant stake in Kruger Products, the company behind household staples like Cashmere, Purex, Scotties, and SpongeTowels. These are brands that dominate their aisles across Canada, and they represent the kind of essential spending that doesn’t disappear during recessions. People might cut vacations or delay car upgrades, but they won’t stop buying tissues or toilet paper. That consistent consumer demand gives Kruger — and by extension, KPT — a recession-resistant business model that keeps cash flowing regardless of the economic cycle.
The stock’s recent weakness has little to do with its long-term outlook and more to do with short-term market sentiment. Higher input costs for pulp and packaging materials, along with softer margins in earlier quarters, weighed on results and scared off some investors. But those pressures are easing. In its latest quarter, Kruger Products reported revenue growth of 7% year over year to nearly $491 million, with adjusted earnings before interest, taxes, depreciation, and amortization rising 13% to $56 million. Those numbers show that the business is already regaining profitability as supply chain costs normalize — a key signal that free cash flow, and therefore dividend sustainability, is strengthening again.
And that dividend is exactly what makes KPT so appealing for long-term investors. The stock currently offers a yield of roughly 5.5%, paid quarterly, with a track record of consistent distributions even during economic slowdowns. While the payout ratio can fluctuate depending on input costs and market conditions, management has shown an unwavering commitment to maintaining shareholder income. The company’s conservative capital structure and partnership with Kruger Inc. — a family-owned, decades-old Canadian institution — also add a layer of stability that few small-cap dividend stocks can match.
Another reason KPT still looks attractive despite its share price drop is its long-term pricing power. The company has gradually introduced price increases to offset inflation, and consumers have accepted them with little resistance. That’s the advantage of selling essential, trusted brands — customers stay loyal, and margins recover over time. As inflation continues to cool and energy and transportation costs decline, KPT’s profitability should improve further, giving it room to maintain or even grow its dividend over the long run.
From a valuation standpoint, KPT now trades at levels that make little sense given its business strength. It’s priced as though the challenges of the past year will persist indefinitely, even though earnings are rebounding. This disconnect between sentiment and fundamentals gives long-term investors an opportunity to buy a reliable income stream at a discount. It’s the kind of scenario where patient investors can lock in an above-average yield and let time — and steady consumer demand — do the compounding.
In short, TSX:KPT is an oversold dividend stock that still deserves a place in a long-term income portfolio. It operates in a defensive sector, sells indispensable products, and continues to deliver cash flow that supports generous dividends. While short-term headwinds have pushed the stock lower, the fundamentals behind its business remain sound and resilient. For those seeking decades of dependable, inflation-resistant income, KPT offers exactly that — a steady payout backed by household essentials that Canadians will keep buying long after the market’s worries fade away.
