MGA - 3 TSX Growth Stocks That Pay You to Wait
Wouldn’t it be nice to receive income while waiting for price appreciation from your stocks. Here are three TSX growth stocks from three different sectors that could do just that!
A Canadian bank stock that pays an awesome dividend
The Big Six Canadian bank stocks often steal the limelight for delivering decent long-term returns and stable dividends. Over the next three to five years, smaller Canadian Western Bank (TSX:CWB) has the potential to deliver much stronger returns from being a cheaper stock now. Higher earnings growth can also turn into higher returns as well.
At about $28 per share, the Canadian bank stock trades at about 7.7 times earnings, which is a discount of roughly 30% from the industry multiple. Compared to its own long-term normal valuation, the value stock trades at even a steeper discount of 36%.
Importantly, the bank stock’s dividend yield of 4.4% is safe. Its trailing 12-month (TTM) payout ratio is 38% of net income available to common stockholders. Also, it has a 30-year dividend-growth streak. Its 10-year dividend-growth rate (DGR) is 7.6%, which competes well with its big Canadian bank peers. If things go smoothly, the dividend stock could double investors’ money in a few years.
Magna International stock is depressed
Auto part maker Magna International’s (TSX:MG) (NYSE:MGA) business results have been pressured by a number of factors, including from supply disruptions, higher inflation, and higher labour costs. A reverse of some of these events can drive above-average price appreciation in the cyclical stock over the next three to five years.
At roughly $83 per share, Magna stock yields 2.8%. Analysts’ average 12-month price target represents 30% near-term upside potential, which suggests the stock trades at a cheap forward valuation. Over the next few years, it could deliver a double-digit rate of return.
Magna’s track record of increasing dividends is also a confidence booster for investors. It has increased its dividend for about 12 consecutive years with a 10-year DGR of 13.2%. The cyclical company maintains a sustainable payout ratio to protect its dividend through the ups and downs of the economic cycle. For example, its TTM payout ratio was 76% of net income and 58% of free cash flow.
Savaria could be on the verge of turning around
Savaria (TSX:SIS) is the smallest stock of the three with a market cap of less than $1 billion. However, it’s a small stock with big growth prospects. Its portfolio of products improves the accessibility of seniors. Since the aging population is growing around the globe at a higher rate, the global company can benefit from increased demand.
The company is also known to make acquisitions, which could be catalysts for growth as well as make it a bumpy ride to hold the stock. SIS stock has generated out-of-this-world returns for long-term investors. For example, an investment from 10 years ago grew investors’ money 12-fold, turning $10,000 into about $123,127!
After selling off significantly in the last year, Savaria stock has based and may be starting another upward trend. At least, analysts think it has 49% upside over the next 12 months. Meanwhile, it yields 3.4% and is also a Canadian Dividend Aristocrat, like the other two stocks.
The post 3 TSX Growth Stocks That Pay You to Wait appeared first on The Motley Fool Canada .
Fool contributor Kay Ng has positions in Canadian Western Bank, Magna Int’l, and Savaria Corp. The Motley Fool recommends Magna Int’l and Savaria Corp.
2022