1 Ideal Canadian Stock for Both Growth and Dividends

Ag Growth International mixes essential, recession-resistant demand with a debt-cutting turnaround and cheap valuation.

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Key Points
  • Ag Growth makes essential grain-handling equipment, giving it steady global demand tied to food supply.
  • Management reduced debt, improved margins, and is seeing strong orders, boosting earnings momentum.
  • Trading near 8x forward earnings with a 1.9% yield, AFN looks undervalued with room for dividend growth.

To find growth and dividends from a Canadian stock, there are a few items to consider. Investors want to focus on companies that generate consistent cash flow, reinvest profits wisely, and reward shareholders through steady payout increases. Look for businesses with expanding revenue and earnings, ideally in sectors with long-term demand drivers like infrastructure, technology, or clean energy. All while they maintain manageable debt and a payout ratio below 70%.

A rising dividend track record signals strong management and financial health, while growing free cash flow shows the dividend stock can fund both operations and shareholder returns. The sweet spot is a stock with a modest but growing yield and a clear path for earnings expansion – one that lets you earn income today and enjoy capital gains tomorrow.

farmer holds box of leafy greens

Source: Getty Images

Ag Growth

Ag Growth International (TSX: AFN) is one of those rare Canadian industrials that quietly bridges the gap between dependable dividends and long-term growth. Based in Winnipeg, AFN designs and manufactures grain handling, storage, and processing equipment used by farmers and agribusinesses around the world. It’s deeply tied to the global food supply chain, so its products are always in demand.

And to be clear, not just in strong agricultural cycles but also as developing economies modernize their infrastructure. That essential role gives AFN a resilient, cash-generating foundation that supports both steady income and reinvestment for future expansion.

Turning it around

Yet what makes AFN stand out today is how it has evolved. The dividend stock went through a challenging period of high debt and earnings pressure, but in recent years management has aggressively deleveraged the balance sheet, simplified operations, and improved profitability. That turnaround has restored investor confidence and positioned AFN for a new phase of growth.

With food demand climbing and global grain trade expected to expand, the company is now benefiting from record equipment orders and improving margins. Its international exposure from North America to Latin America and Asia also reduces reliance on any single market. This gives it a strong growth runway as countries invest in more efficient food production and storage systems.

Value and income

AFN’s dividend adds another layer of appeal. It currently yields around 1.9%, a payout backed by healthy free cash flow and a conservative distribution ratio after recent balance sheet improvements. That payout is not only sustainable, but also has room to grow as earnings recover at a low 48% payout ratio. Furthermore, the dividend stock has a history of rewarding shareholders while still reinvesting heavily in product innovation, automation, and global expansion.

From a valuation standpoint, AFN still trades below its historical averages, which gives investors the opportunity to buy into a recovering growth story that’s already generating solid cash flow. It now trades at just 8 times forward earnings and 0.45 times sales. Analysts have turned more bullish, noting that the dividend stock’s profitability improvements and ongoing cost efficiencies are setting it up for consistent earnings growth over the next few years. In addition, the secular demand for food security, storage infrastructure, and sustainable agriculture means AFN’s business has long-term relevance that few industrials can match.

Bottom line

Ag Growth International is the kind of dividend stock that rewards patience and conviction. It has rebuilt its financial strength, revitalized growth momentum, and offers a dependable dividend that can grow with its earnings. Even during this turnaround, here’s what investors could bring in from a $7,000 investment.

COMPANYRECENT PRICENUMBER OF SHARESDIVIDENDANNUAL TOTAL PAYOUTFREQUENCYTOTAL INVESTMENT
AFN$32.74213$0.60$127.80Quarterly$6,977.62

For Canadian investors looking for a balance between income and upside, AFN fits the profile of a perfect growth-and-dividend stock for the years ahead.

Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool recommends Ag Growth International. The Motley Fool has a disclosure policy.

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