Most investors chase stocks that are trading at record highs and benefit from the underlying momentum. However, a contrarian strategy is to identify quality, undervalued stocks trading at a lower valuation.
One such TSX dividend stock is Thomson Reuters (TSX:TRI), down 51% from all-time highs and offering a 2.6% yield.
For patient investors building a Canadian dividend portfolio, the ongoing pullback could indicate a buying opportunity.
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Is this TSX dividend stock a good buy?
Thomson Reuters is a Toronto-based information and technology company. It serves legal, tax, audit, and compliance professionals through products like Westlaw, Practical Law, and CoCounsel, as well as the Reuters news agency.
In the second quarter (Q2) of 2026, Thomson Reuters reported organic revenue growth of 8% for the total business. Its core Big Three division, which covers Legal Professionals, Corporates, and Tax, Audit & Accounting, grew organically by 10%.
CEO Steve Hasker said on the call that the acceleration was broad-based, driven by strong law firm demand and improving momentum from products like Westlaw and CoCounsel.
Management also raised its full-year 2026 outlook, now expecting total and organic revenue growth of approximately 8%, at the high end of its prior range.
Adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) rose 10% year over year to US$745 million in the quarter, with margins expanding 30 basis points to 38.1%. Free cash flow jumped 29% to US$727 million.
Given a quarterly dividend expense of US$283 million, the payout ratio is less than 40%. A low payout ratio has allowed Thomson Reuters to increase the annual dividend from US$1.52 per share in 2019 to US$2.66 per share in 2026.
In the second quarter, the company completed a US$605 million return-of-capital transaction and a US$600 million share-buyback program announced in February.
Combined, these actions reduced the share count by roughly 3%. Thomson Reuters also paid down US$500 million in maturing debt during the quarter.
Management has been clear about its priorities. CFO Gary Bischoping described the company’s approach on the Q2 call, stating, “We remain committed to growing the dividend over time, and we’ll consider capital returns through share repurchases and another return of capital to shareholders.”
Analysts forecast the Canadian dividend stock to increase free cash flow from US$1.95 billion in 2025 to US$3.2 billion in 2030.
If the TSX stock is priced at 21 times forward FCF, below its five-year average of 35 times, it could return over 40% within the next four years. Adjusting for dividends, cumulative returns could surpass 50%.
On July 14, Thomson Reuters announced a deal to sell a 51% stake in its Global Print business to KKR for about $500 million, a move management expects to be modestly accretive to organic growth once it closes later this year.
What’s next for the TSX dividend stock
What makes Thomson Reuters more than just a value play is the AI angle layered on top of a stable, cash-generating base.
The company has built its own legal-specific large language model, called Thomson, using a small fraction of its proprietary legal content. Hasker called the early results a turning point for the business.
“For us to create a large language model, it performs at the level it does in its first version, I think speaks to us owning our future,” he said on the Q2 call.
CoCounsel, the company’s AI-powered assistant for legal and tax professionals, had already reached one million users as of mid-2026, according to remarks at the company’s June 10, 2026, annual shareholder meeting. A newly rebuilt, fully agentic version of CoCounsel Legal completed its beta ahead of schedule in June and is rolling out more broadly.
A combination of accelerating organic growth, raised guidance, an active capital return program, and AI-driven product innovation is rare in a stock trading this far below its peak.
I see Thomson Reuters as a compelling buy-and-hold candidate for Canadian dividend investors right now.
