3 Undervalued Canadian Dividend Stocks to Buy Now and Hold for Years

Three Canadian value ideas offer a mix of growth, income, and a real-asset discount, without relying on a “too-good-to-be-true” yield.

Key Points
  • Couche-Tard looks like a “quality value” play, with strong earnings growth and a low payout ratio that leaves room to raise dividends.
  • OpenText is cheaper and higher-yielding, with cloud and AI catalysts, but debt and cash-flow softness are key risks.
  • CAPREIT trades well below stated NAV and pays monthly, yet rate, refinancing, and property-value risks could keep the discount.

A low share price can be tempting. A giant yield can be even more tempting. Neither one, on its own, tells you whether a stock is actually a good deal.

The useful question is whether the market underestimates a company’s future cash flow. Sometimes investors punish a sound business for a fixable problem. Other times, they correctly spot a melting ice cube wearing a dividend-shaped hat.

That distinction matters when you plan to hold for years. A bargain should offer a durable business, a manageable balance sheet, a covered payout, and a believable reason for results to improve.

Source: Getty Images

How to judge the discount

Valuation is relative. A slow-growing utility may deserve a lower multiple than a retailer increasing earnings at a double-digit pace. Real estate investment trusts (REIT) are often better judged against net asset value and funds from operations, while software companies demand a close look at recurring revenue and free cash flow. Furthermore, the dividend needs context too. Yield, payout coverage, and growth matter more together than separately. So, let’s consider these three dividend stocks separately, but equally.

ATD

Anyone who has grabbed coffee or fuel at Circle K already knows Alimentation Couche-Tard (TSX: ATD). Its enormous store network brings purchasing power, while food, beverages, loyalty programs, and car washes can lift profit beyond the fuel pump.

Couche-Tard isn’t bargain-bin cheap at about 19 times trailing earnings. The value case rests on quality and growth. Fiscal 2026 adjusted diluted earnings per share (EPS) rose 14.4%, while fourth-quarter adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) jumped 30.9%. Meanwhile, the annual dividend is only $0.86 per share, and the payout ratio sits near 18%.

That leaves ample room for reinvestment, acquisitions, buybacks, and future dividend increases. Weaker fuel volumes, a strained consumer, or a poorly executed deal could spoil the story. Still, this is the sort of modest yield that can become much more interesting after a decade of growth.

OTEX

OpenText (TSX: OTEX) helps enterprises manage, secure, and use vast amounts of information. That sounds dull until you remember that artificial intelligence (AI) is rather useless without clean, governed data.

The shares are down roughly 16% over the past year, 41% from 52-week highs, and trade near 11 times trailing earnings. OpenText stock also yields about 4.8%. Its latest quarter delivered 2.2% revenue growth, 6.6% cloud growth, and a 29.6% increase in enterprise cloud bookings. Those figures suggest the cloud transition has a pulse.

A new chief executive, expanding AI tools, and sovereign-cloud demand provide potential catalysts. Heavy debt and an 18.4% quarterly decline in free cash flow are the unglamorous bits investors must watch. So cheap doesn’t mean uncomplicated.

CAPREIT

Canadian Apartment Properties REIT (TSX: CAR.UN) owns roughly 45,400 rental suites and townhomes. Housing demand is wonderfully easy to understand, and its monthly distribution adds a pleasant bit of predictability.

At about $35 per unit, CAPREIT trades approximately 36% below its latest net asset value of $54.79. First-quarter funds from operations (FFO) per unit still increased 1.7%, and the annualized $1.55 distribution produces a yield near 4.4%.

Stable operations, debt reduction, and a friendlier interest-rate environment could help close part of that gap. Rent controls, refinancing costs, and falling property values remain real risks, so that discount is not free money.

Foolish takeaway

Let’s say you used three contributions from a Tax-Free Savings Account (TFSA). Here is a roughly equal split using recent share prices and whole shares. The three positions would cost $6,901.06 and generate about $231.72 annually at current payout rates, leaving $98.94 uninvested.

COMPANYRECENT PRICENUMBER OF SHARESANNUAL DIVIDENDANNUAL TOTAL PAYOUTFREQUENCYTOTAL INVESTMENT
ATD$91.1625$0.86$21.50Quarterly$2,279.00
OTEX$32.6271$1.52$107.92Quarterly$2,316.02
CAR.UN$34.9466$1.55$102.30Monthly$2,306.04

Couche-Tard supplies growth, OpenText stock brings value and income, and CAPREIT contributes monthly cash flow. Holding for years still requires checking that each thesis remains intact. Patience works best when it has standards.

Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alimentation Couche-Tard. The Motley Fool has a disclosure policy.

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