EQB:CC - Better Buy in June: Passive-Income Plays or Growth Stocks?
2024-06-13 21:15:00 ET
Creating an investment strategy is always tricky, given that you need to consistently outpace inflation and aim to beat the broader markets. Over the years, investors have deployed a variety of strategies, including investing in undervalued stocks, growth stocks, and dividend stocks.
For instance, Warren Buffett is a value investor and identifies companies that trade below their intrinsic value. Comparatively, Cathie Wood is an investor with a much higher risk appetite and invests in companies that aim to disrupt multiple industries.
Ideally, an investment strategy will depend on several factors, such as your age, risk appetite, and investment horizon. An individual closer to retirement seeking passive income may invest in blue-chip dividend stocks that offer a tasty dividend yield. Alternatively, a younger investor may have a higher allocation to growth stocks.
However, investing in dividend-paying growth stocks is another strategy that should help you to beat the major indices over time. Here, you invest in growth stocks that also pay shareholders a dividend. Due to consistent earnings and cash flow expansion, these companies should increase their dividends each year, enhancing the yield at cost in the process. Here are two such dividend stocks you can invest in June 2024.
goeasy stock
Valued at $3 billion by market cap , goeasy ( TSX:GSY ) offers shareholders an annual dividend of $4.68 per share, indicating a forward yield of 2.5%. These payouts have risen by more than 15% annually in the last two decades, which is exceptional for a lending company like goeasy. In the last 10 years, goeasy stock has returned more than 1,130% to shareholders after adjusting for dividends.
goeasy entered the consumer lending segment in 2006 and is armed with a product suite that serves Canada’s non-prime credit market. The company recently announced that its consumer loan portfolio surpassed $4 billion in gross loan balances, up from $3 billion in April 2023.
goeasy is among the largest non-prime consumer lenders in Canada with over 400 locations across the country in addition to a widening digital presence. To date, it has originated over $13.5 billion in consumer loans, serving 1.4 million customers.
Despite its stellar performance, goeasy stock is cheap and trades at 11 times forward earnings . Analysts remain bullish and expect shares to surge 18% in the next 12 months.
EQB stock
EQB ( TSX:EQB ) recently announced its fiscal second quarter of 2024 (ended in April) results and reported record sales with earnings growth of 7% year over year and a return on equity of more than 15%. Its stellar results allowed EQB to raise dividends by 22% year over year. The mid-cap TSX bank now offers shareholders an annual dividend of $1.80 per share, indicating a yield of 2%.
In the last six months, it has reported revenue of $1 billion and $433 million in earnings, indicating a profit margin of over 43%. Analysts tracking EQB expect it to increase adjusted earnings from $9.4 per share in fiscal 2023 to $12.8 in fiscal 2025.
So, priced at seven times forward earnings, EQB stock is very cheap and trades at an 18% discount to price target estimates.
The post Better Buy in June: Passive-Income Plays or Growth Stocks? appeared first on The Motley Fool Canada .
Fool contributor Aditya Raghunath has no position in any of the stocks mentioned. The Motley Fool recommends EQB. The Motley Fool has a disclosure policy .
2024