Investing in undervalued dividend stocks is a good strategy for those looking to benefit from a steady payout and capital gains. In this article, I have identified two such TSX dividend stocks that are down more than 40% from 52-week highs to buy and hold right now.
Source: Getty Images
Is this TSX dividend stock a good buy?
Down almost 60% from all-time highs, Ag Growth International (TSX: AFN) is valued at a market cap of $418 million. Ag Growth International manufactures and distributes grain handling, storage, and processing equipment for bulk agricultural commodities worldwide.
The Winnipeg-based company produces grain bins, and portable and permanent handling systems including augers and conveyors, dryers, aeration products, and blending equipment.
Its products serve farmers, grain terminals, corporate farms, fertilizer sites, ethanol production facilities, and commercial feed mills globally.
AGI has 27 manufacturing facilities in the Americas, Europe, and Asia, enabling global distribution of its products. It generates 47% of revenue from international markets, 33% from the U.S., and 20% from Canada.
In recent years, the company has focused on operating efficiencies and margin expansion, which should lower its dividend payout ratio in the near term.
Analysts tracking the TSX stock forecast its free cash flow to improve from $61 million in 2025 to $201 million in 2029. Given an annual dividend expense of $11 million, its dividend payout ratio should improve from 19% in 2025 to less than 6% in 2029.
If AFN stock is priced at five times forward FCF, it should more than double over the next three years after adjusting for dividend reinvestments.
Is this Canadian dividend stock undervalued?
Down 44% from all-time highs, goeasy (TSX: GSY) is a TSX dividend stock that offers you a yield of 5% in December 2025. goeasy is part of the financial lending space, and the stock trades at a lower multiple as investors are worried about a sluggish macro environment and rising delinquency rates.
Despite the ongoing pullback, goeasy stock has returned close to 700% to shareholders in the past decade.
goeasy Limited reported mixed third-quarter results as Canada’s largest non-prime consumer lender navigates persistent macroeconomic headwinds while maintaining aggressive growth targets. The company grew its loan portfolio by $336 million to $5.4 billion, driven by record credit applications and $946 million in originations. Revenue hit an all-time high of $440 million, up 15% year-over-year.
Anchored by a strong balance sheet
Despite strong top-line growth, earnings per share declined to $4.12 from $4.33 in the prior year period. The compression came from lower portfolio yields as federal interest rate caps continue to flow through the loan book, increased credit loss provisions, and higher financing costs from the company’s August high-yield notes offering, which raised $796 million. Management estimates that the 21-basis-point increase in provisions alone knocked roughly $0.50 off adjusted earnings per share.
However, early-stage delinquencies jumped 60 basis points from the prior quarter to 4.5% as borrowers struggled with unemployment at 7.1%, negative GDP growth, and mounting tariff uncertainty. In response, the company increased its allowance for credit losses from 7.9% to 8.1%, adding $92 million to reserves year-to-date.
goeasy’s balance sheet remains well-capitalized with over $400 million in unrestricted cash and $2.3 billion in total funding capacity. The debt-to-tangible-equity ratio reached 4 times, near the high end of the target range, which reflects elevated cash from the recent notes offering. The company returned $100 million to shareholders through buybacks year-to-date while maintaining its quarterly dividend.
goeasy has increased its annual dividend per share from $0.48 in 2016 to $5.84 in 2025, significantly enhancing the yield-at-cost.
