When it comes to building long-term wealth in the stock market, some of the best TSX stocks you can invest in are high-quality businesses that generate strong cash flow, grow consistently over time, and pay a dividend that actually grows with the business.
And when a stock like that is trading cheaply, and you have the chance to gain exposure, the opportunity becomes even more compelling. That’s exactly the situation with goeasy (TSX: GSY) right now.
Currently, the stock offers a dividend yield of roughly 4.4%, which is unusually high for a business that has historically delivered strong earnings growth. More importantly, this isn’t a company paying a high yield because it’s in trouble. It’s paying a high yield because the stock has sold off significantly, even though the long-term fundamentals remain intact.
Furthermore, goeasy isn’t even particularly known for its dividend. In fact, it’s such a high-potential growth stock with such an impressive track record of rapid growth that investors have always seen the dividend income and growth it provides as the cherry on top.
So, with that in mind, if you’re looking for a high-quality dividend stock that offers an attractive yield and tonnes of growth potential, and trades cheaply, here’s why goeasy is one of the best picks on the TSX to buy now.
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Why is goeasy a stock you can have confidence owning for the long haul?
goeasy is one of the best stocks to buy and hold for the long haul, and offers so much potential in large part due to the industry in which it operates, as well as its disciplined approach and track record of strong execution.
And even though it operates in the non-prime consumer lending space in Canada, which might sound risky on the surface, goeasy has spent decades refining its underwriting, risk management, and collections processes.
Therefore, since it prices credit appropriately and minimizes its charge-off rate, the TSX dividend stock generates industry-leading margins and has built a business that can scale quickly. So as goeasy continues to grow its loan book, it benefits from improving operating leverage, which helps drive strong earnings growth over time.
Why is goeasy one of the best dividend stocks on the TSX to buy now?
Although the TSX dividend stock has been selling off due to temporary headwinds, which have slightly impacted its profitability, goeasy has such high margins and generates such significant cash flow that its dividend is incredibly insulated.
So, even though goeasy has raised its annual dividend by a whopping 121% over the last five years, and even though it offers a yield of 4.4%, which is sky high for a high-potential growth stock of goeasy’s quality, the dividend still has a payout ratio of less than 40%.
To get an idea of how cheap goeasy is today, it’s trading at a forward price-to-earnings ratio of just 6.9 times today. That’s well below its five-year average of 10.2 times.
Therefore, with goeasy trading this cheaply, not only can investors buy one of the best growth stocks on the TSX at a significant discount, but by doing so, you lock in a much higher dividend yield on your investment.
