If you have been watching TerraVest Industries (TSX: TVK) from the sidelines, the recent pullback moved this Canadian industrial stock into oversold territory.
The TSX dividend stock is down 32% from its 52-week high. Despite recent turbulence, TVK stock has returned nearly 2,400% to shareholders over the past decade, after adjusting for dividends.
I think TVK is a buy right now. Here is why.
Image source: Getty Images
Why is this TSX dividend stock down in 2026?
On June 5, 2026, Le Journal de Montréal reported that TerraVest’s Executive Chairman Charles Pellerin allegedly helped others make illicit gains by communicating inside information ahead of a March 2025 transaction, citing a search warrant from Quebec’s financial markets regulator, the Autorité des marchés financiers (AMF).
The board launched a review into the allegations. TerraVest has not said regulators have reached out directly, and there are no charges at this time.
A newspaper report and a regulatory search warrant are not a conviction, but the beginning of a long-drawn process. So expect the TSX stock to remain volatile over the next few months.
A strong business model
While the Canadian dividend stock was selling off, the underlying business was quietly posting solid numbers.
- In fiscal Q2 2026 (ended in June), TerraVest reported revenue of $442.6 million, an increase of 42% year over year. In the last six months, revenue rose by 56% to $851 million.
- Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) rose 15% to $75.5 million in Q2 and were up 25% in the last six months.
- However, the company reported net income of $12.7 million for the quarter, down from $33.3 million a year ago.
The net income decline was attributed to higher depreciation, amortization, and financing costs tied to acquisitions. Comparatively, operating cash flow rose 71% to $58.5 million, more than doubling over the last six months.
TerraVest is a serial acquirer of industrial businesses across four segments: HVAC and Containment Equipment, Compressed Gas Equipment, Processing Equipment, and Service.
The company manufactures everything from home heating furnaces and propane transport trailers to fibreglass storage tanks and biogas production equipment.
Recent acquisitions include KBK Industries (fibreglass and steel storage tanks for the U.S. market), EnTrans Holding, Simplex, and Tankcon, among others. Management noted that opportunities for synergy between new additions and the existing portfolio remain a key focus.
A sustainable dividend
On the dividend front, TerraVest declared a quarterly dividend of $0.20 per share, payable on July 10, 2026. The TSX stock offers shareholders a dividend of just 0.6% but is poised to deliver market-beating returns via capital gains.
Moreover, TVK is projected to improve its free cash flow from $43.6 million in fiscal 2025 to $229 million in fiscal 2028.
By comparison, its annual dividend expense is less than $20 million, providing it with significant flexibility to raise the payout and pursue accretive acquisitions. Notably, TerraVest has doubled its dividend over the last four years.
If the TSX stock is priced at 20 times forward FCF, it can double within the next 18 months.
The Foolish takeaway
TVK is not a risk-free investment right now. The governance situation is real and warrants monitoring. But the underlying business is growing, cash generation is strong, the dividend is well-covered, and the stock is trading at a steep discount to historical multiples.
For investors with a multi-year time horizon, this looks like the kind of dip that rewards patience.
