The most compelling investments today combine both: they offer a growing income stream and the potential for outsized profits as the company grows and its valuation normalizes.
One top Canadian stock fits that description remarkably well. While it’s not without risk, its long-term track record, current valuation and shareholder-friendly policies suggest it could truly be one of the best investments of the decade.
A risky venture with exceptional long-term results
easy (TSX:GSY) is not a stock for the faint of heart. The stock price can be volatile and often experiences sharp declines during periods of economic uncertainty or recession.
However, history shows that investors who buy during this sell-off – when sentiment is weak but fundamentals remain intact – have been richly rewarded.
After falling about 36% from its 52-week high, goeasy now trades at a discount of about 28% to its long-term average valuation. That discount makes sense, especially when you consider what the company has delivered over the past decade.
Despite the recent weakness, goeasy has been a 9.5 bagger over the past decade, turning a $10,000 investment into about $95,470. That equates to an impressive compound annual growth rate of around 25%.
Those are not the results of a cycle of happiness. They reflect a business model that has grown consistently across different economic environments.
A scalable growth engine built for non-prime lending
goeasy operates in the non-prime lending market, serving Canadians who cannot borrow from traditional banks. While that may sound risky – and it is – the company has built a diversified and increasingly sophisticated platform to manage that risk.
The growth strategy includes multiple credit products, including secured auto loans, home loans, personal loans and leasing. It also benefits from an omnichannel distribution model, which combines physical locations, digital platforms and a merchant network. Importantly, management continues to shift toward higher-margin secured lending while investing heavily in data analytics and underwriting technology to improve credit quality.
Due to its business model, goeasy has a non-investment grade S&P credit rating of BB-, leading some investors to avoid the stock entirely. However, that skepticism is precisely what creates opportunities. When purchased at a significant discount and held patiently, the stock has historically delivered exceptional recoveries.
A rare combination of growth and income
One of goeasy’s most underrated strengths is its dividend growth. The company has increased its dividend for about eleven years in a row and boasts a staggering ten-year dividend growth rate of 30.7%. Over the past decade, it has delivered double-digit dividend increases in every year but one – an extraordinary level of consistency.
At its current low price of about $134 per share, the stock offers a dividend yield of almost 4.4%, which is unusually high for a company expected to grow at double-digit rates over the long term. With a trailing twelve month payout ratio of just 36%, the dividend appears well protected and positioned for future growth.
For investors with a high risk tolerance and a long-term horizon, goeasy could meaningfully improve portfolio returns. If the company continues to grow at double digits, annualized returns above 20% in the next five years are not out of the question.
Takeaway for investors
goeasy is volatile, misunderstood and undeniably risky – but that’s exactly why the opportunity exists. Trading well below its historical valuation, supported by strong growth fundamentals and a rapidly rising dividend, it has the potential to be one of the most rewarding Canadian investments of the decade for patient long-term investors.
#stock #investment #decade