If you’re a long-term investor, there’s no question that some of the best Canadian stocks to buy and hold for decades are dividend-growth stocks, especially when they’re cheap.
And not just because they pay you more and more cash every year. More importantly, companies that can consistently grow both their earnings and dividends are usually high-quality, well-run businesses that are built to last.
A company can only raise its dividend year after year if it’s generating reliable cash flow, managing risk properly, and growing its underlying business. That’s why dividend-growth stocks are easily some of the best stocks to buy for the long haul, because they give you the confidence to hold them through all economic environments.
On top of that, dividend growth creates a powerful compounding effect. Not only is your dividend already growing every year, but if you reinvest those dividends, you’re buying more shares that then generate even more income.
And while dividend-growth stocks are some of the best long-term investments you can buy in general, buying them when they’re cheap can significantly enhance your long-term returns.
So, with that in mind, if you’re a Canadian investor who’s looking for a cheap dividend-growth stock to buy now, here’s why goeasy (TSX: GSY) is a no-brainer.
Source: Getty Images
Why is goeasy a business you can have confidence owning for decades?
goeasy operates in the non-prime consumer lending space in Canada, providing installment loans, leasing products, and other financial services to borrowers who don’t qualify for traditional bank credit.
And while that may sound risky at first glance, goeasy has built a highly disciplined and data-driven lending operation for years now. It has a proven record of consistently managing its risk and keeping its charge-off rate within its target ranges
Furthermore, because non-prime lending is a niche industry that has higher risk, goeasy earns significantly higher margins than traditional lenders.
Therefore, that combination of ever-increasing demand for these loans, goeasy’s pricing power and its consistent operational efficiency is why it’s been a top dividend growth stock for years, and why it continues to be one of the best long-term investments that Canadians can buy today.
Why goeasy shares are so cheap right now
With concerns being raised about goeasy’s charge-off rates and after the company posted third-quarter earnings that slightly missed expectations due to higher credit-related costs, some risk and uncertainty crept in late last year, which understandably pressured the stock’s valuation.
However, for goeasy to now be trading roughly 40% below its 52-week high feels way overblown, and shows why it’s one of the best dividend-growth stocks that Canadian’s can buy now.
And while earnings could remain temporarily impacted by elevated credit provisions over the next few quarters, the business itself is nowhere near risky or unprofitable.
In fact, even with earnings under pressure recently, goeasy still has a payout ratio of less than 40%. And this isn’t some minor dividend either. With the stock trading this cheaply, its dividend yield has climbed to roughly 4.4%.
Furthermore, although analysts expect its profitability to remain under pressure over the next few quarters, goeasy is still projected to grow normalized earnings per share by more than 25% in 2026 and another 20% in 2027.
Why it’s one of the best dividend-growth stocks that Canadian investors can buy today
With goeasy trading roughly 40% off its 52-week high, it currently trades at a forward price-to-earnings (P/E) ratio of 6.9 times. That’s well below its five- and 10-year average P/E ratios of 10.2 times and 9.8 times, respectively.
Additionally, the rapid growth of its operations every year also expands its dividend. So, not only does goeasy offer a yield of 4.4% on an ultra-safe dividend, but over the last five years, that dividend has increased by a whopping 121%.
Therefore, while one of the best and most reliable dividend-growth stocks on the market trades at such a cheap valuation, there’s no doubt it’s one of the best investments Canadians can make today.
