Canadian shoppers have pulled back on big-ticket purchases this year, and furniture retailers are feeling the heat. Leon’s Furniture Limited (TSX: LNF), which operates under the LFL Group banner alongside The Brick, is no exception.
Valued at a market cap of $1.6 billion, LNF stock is down 23% from all-time highs, raising the dividend yield to more than 4% in August 2026.
For income-focused investors eyeing a Canadian dividend stock trading at a discount to its own real estate value, that combination is hard to ignore.
Source: Getty Images
Why this Canadian dividend stock is a top buy
LFL Group reported second-quarter 2026 revenue of $631.2 million, down 2% year over year. System-wide sales fell 2%, and same-store sales dropped 2.2%.
While retail delivered units rose year over year, average ticket prices declined, which indicates that Canadians are still furnishing their homes but hunting harder for value.
President and CEO Mike Walsh summed up the dynamic clearly on the call. “We’re seeing that customer lowering down to more of the opening price point. So yes, we’re selling more units at a lower average sale price,” he told analysts.
- Gross margin in Q2 held near 44.6%, slightly lower year over year, after adjusting for one-time items.
- Mattress sales grew for a second straight quarter, and management credited a disciplined assortment strategy for the improvement.
- Furniture sales fell 4.2%, but that followed 6% growth in the same quarter last year, so the comparison was always going to be tough.
More telling is what LFL Group did with its cash. The company ended the quarter with $560.1 million in unrestricted liquidity, including cash, marketable securities, and its undrawn credit line.
It still repurchased about 120,000 shares for roughly $3 million during the quarter under its normal course issuer bid, on top of its regular dividend.
The company also disclosed a fresh appraisal valuing its owned real estate at $1.17 billion, a figure well above the historical cost carried on its books.
Management said the appraisal was meant to give investors a clearer market-based reference point as it continues weighing a potential real estate investment trust spinout, a move that could eventually unlock more value for shareholders.
Chief Financial Officer Victor Diab flagged two near-term headwinds worth watching. Freight and container costs have risen, and shipping delays on certain Asian lanes could crimp inventory availability in the third quarter.
He was careful to frame it as a supply issue rather than a demand problem, noting that comparisons ease significantly by the fourth quarter, when the company faces easier year-over-year hurdles.
Early signs from July were encouraging too. Walsh described “some green shoots” in written sales and traffic, though he cautioned that it is still early and based on orders rather than completed deliveries.
Should you buy this dividend stock now?
Here is my take.
LFL Group is not firing on all cylinders yet, but it is managing a tough consumer environment about as well as a retailer can.
Margins are holding up, the balance sheet is strong, management kept returning cash to shareholders through the downturn, and real estate worth well over a billion dollars sits on the books at a fraction of that value.
Add a yield near 4.1%, and this looks like a Canadian dividend stock patient investors can buy for income today while waiting for a cyclical recovery and a possible REIT (real estate investment trust) catalyst down the road.
Analysts forecast free cash flow (FCF) to improve from $175 million in 2026 to $262 million in 2030. Given an annual dividend expense of $66 million, the Canadian dividend stock has a well-covered payout ratio. If the TSX stock is priced at 10 times forward FCF, it could almost double within the next four years, after adjusting for dividends.
The near-term freight and inventory pressure is real, and investors should expect a choppy third quarter. But for anyone building a diversified income portfolio, LFL Group’s combination of yield, buybacks, and hidden real estate value makes a compelling case for a spot on your watch list or in your portfolio.
