Because dividends are not guaranteed, it is essential to identify companies that are fundamentally strong and have demonstrated the ability to maintain their payouts over business cycles.
In this article, I’ve identified one undervalued TSX stock that offers you a 1% forward yield. A 67% decline from record highs, Pollard banknote (TSX:PBL) sells lottery and charity gaming products worldwide, including instant tickets, pull-tab tickets and bingo paper. The company provides digital gaming solutions including eInstants and iLottery platforms, vending machines, loyalty programs and lottery management services.
Despite the continued decline, TSX stock has more than tripled shareholder returns over the past decade. This is why I’m bullish on this small-cap stock right now.
Is this TSX dividend stock a good buy?
Pollard Banknote delivered solid second-quarter results, demonstrating the diversification and resilience of its business model. In the quarter ended June, it reported combined revenue of $174.8 million, including revenue from the NeoPollard joint venture.
The standout remains the joint venture NeoPollard Interactive, which has achieved record results for the second consecutive quarter.
Strong electronic instant ticket sales in Virginia and North Carolina drove the exceptional performance as the joint venture contributed $17.7 million in revenue, compared to $14.1 million in the same period last year. These long-term contracts generate meaningful cash flow that is expected to continue for the next decade.
Management remains focused on improving direct ticket margins through strategic pricing and operational efficiency initiatives. While physical ticket volumes remained stable, average selling prices increased significantly, reflecting the impact of revised contracts that now cover approximately 75% of revenue. The company is focusing on higher-margin sales rather than lower-value volume, which should boost profit margins.
Pollard successfully expanded its footprint in charity gaming through the acquisition of Pacific Gaming, adding portable electronic bingo devices to complement its purchase of bingo dauber manufacturer CJ Venne last year.
Revenue synergies are on track as the company sells print products alongside electronic solutions, creating a comprehensive offering for the charitable gaming market.
The Kansas iLottery operation completed its first full quarter and continues to meet expectations as its player base grows. Multiple formal requests for proposals remain active, including opportunities in Massachusetts and Belgium, as lotteries increasingly recognize iLottery as critical to long-term success.
Looking ahead, management expects significantly higher instant ticket volumes in the third quarter as customer orders previously shifted from prior periods now flow through production schedules.
Is TSX stock undervalued?
Pollard Banknote has seen revenue increase from $246.4 million in 2016 to $557 million in 2024. Analysts predict revenue will rise to $640 million in 2027. Additionally, adjusted earnings are expected to rise from $1.47 per share in 2024 to $2.39 per share in 2026.
Bay Street also estimates that free cash flow will increase from $48.36 million in 2024 to $69 million in 2026. Given an annual dividend of $0.20 per share, Pollard Banknote ended 2024 with a payout ratio of just over 20%, which isn’t too high. The payout ratio is expected to drop to 8% by 2026.
As of November 2025, the TSX stock is trading at a price-to-earnings ratio of ten times, which is below its historical average of 21.5 times. If Pollard Banknote trades at 15 times forward earnings, it could post a 75% gain over the next twelve months.
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