Should you invest $1,000 in Vanguard Ftse Canadian High Dividend Yield Index Etf right now?

Before you buy stock in Vanguard Ftse Canadian High Dividend Yield Index Etf, consider this:

The Motley Fool Stock Advisor Canada analyst team just identified what they believe are the Top Stocks for 2025 and Beyond for investors to buy now… and Vanguard Ftse Canadian High Dividend Yield Index Etf wasn’t one of them. The Top Stocks that made the cut could potentially produce monster returns in the coming years.

Consider MercadoLibre, which we first recommended on January 8, 2014 ... if you invested $1,000 in the “eBay of Latin America” at the time of our recommendation, you’d have $21,058.57!*

Stock Advisor Canada provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month – one from Canada and one from the U.S. The Stock Advisor Canada service has outperformed the return of S&P/TSX Composite Index by 38 percentage points since 2013*.

See the Top Stocks * Returns as of 2/20/25

12 Years of Dividend Growth and This Tech Stock Is Just Getting Started

Enghouse Systems Limited (TSX:ENGH) is being conservative with its payout and debt ratio. It’s an excellent purchase for investors seeking stable and long-term growth.

| More on:

For income-seeking investors, there’s no better indication of stability and value than a track record of expanding dividends. Multiple years of dividend increases indicate that a company’s culture, financial strategy, and market outlook are all aligned with shareholders’ best interest.

Dividends are, in fact, a great indicator of market-beating returns. The American Dividend Aristocrats Index, which tracks companies that have consecutively increased dividends for 25 years or more, has outperformed the S&P 500 by 1.5 percentage points over the past decade.

A Canadian firm that seems to be heading for the same streak of payouts is Markham-based software services company Enghouse Systems (TSX:ENGH). Enghouse’s quarterly dividends have been expanded for each of the past 12 years. In its most recent update, management boosted the payout amount by 22%.

Shareholders can now expect a quarterly income of $0.11 per share, indicating a dividend yield of 1.36% at the current market price.

It’s worth noting that Enghouse’s dividend yield is actually lower than the yield on a 10-year Canadian government bond at the moment. However, that less-than-attractive yield isn’t a consequence of an unreasonable valuation or lack of profitability, but rather the company’s fiscal conservatism.

Management has decided to payout less than a third of annual net earnings in dividends. The company has over $190.54 million in cash and cash equivalents on its book, which covers the annual payments nearly eight times over. In other words, Enghouse can afford its current dividend for nearly a decade without any income.

What makes the company even more attractive is its intrinsic growth rate. Enghouse’s operations are split between two segments: Interactive Management (technology products to enhance  customer service, increase efficiency and manage customer communications) and Asset Management (investments in technology service products and companies that operate in the same niche industry).

Management tends to reinvest cash in core technologies to augment them with research and fresh intellectual property, while the rest is reserved for acquisitions in the Asset Management segment, such as the recent takeover of Swedish e-ticketing provider Telexis Solutions.

The confluence of both strategies has driven the company’s return on equity (ROE) up to 19.45%. Total revenue is up 56% over the past five years, while adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) has nearly doubled over the same period.

Considering the fact that Enghouse has limited debt (21% of equity), the ROE is a good proxy for the company’s potential growth in the future. Meanwhile, the stock trades at 28 times annual earnings per share, which indicates a fair value for the nearly 20% annual growth potential.

Bottom line

Enghouse’s acquisition and conservative dividend strategy has been great for long-term shareholders. The stock’s total return since its initial offering has been phenomenal.

The 12-year dividend-growth streak puts it in an exclusive club of potential Dividend Aristocrats. If it can keep executing its customer acquisition, research, and mergers strategy with the same rigor, there’s no reason to doubt that it can sustain this dividend growth for the foreseeable future. 

The company’s low debt, financial strength, fair valuation, growth potential, and low payout ratio make it an excellent investment opportunity for investors willing to look beyond the dividend yield.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Vishesh Raisinghani has no position in any of the stocks mentioned.

More on Tech Stocks

Person uses a tablet in a blurred warehouse as background
Tech Stocks

Bargain Alert: 2 AI Champions to Scoop Up During This Market Dip

Canadian investors could consider owning beaten-down AI stocks such as AMD to generate outsized gains in the next 12 months.

Read more »

rising arrow with flames
Tech Stocks

Buy the Dip: This Beaten-Down Canadian Stock Could Double From Here

BlackBerry stock has moved beyond smartphones, yet it looks better than ever at these prices.

Read more »

e-commerce shopping getting a package
Tech Stocks

Should You Buy Shopify While It’s Below $150?

Let's dive into what levels may present a buying opportunity for top Canadian growth stock Shopify (TSX:SHOP).

Read more »

Rocket lift off through the clouds
Tech Stocks

Plummet or Opportunity? Why This TSX Stock Could Skyrocket From Here

This TSX stock may be down for now, but don't count it out as a solid long-term growth opportunity.

Read more »

trends graph charts data over time
Tech Stocks

Buy the Dip: 2 Top TSX Stocks You Can Hold Forever

Canadian investors with a sizeable risk appetite should consider holding TSX stocks such as Shopify to benefit from outsized gains.

Read more »

The virtual button with the letters AI in a circle hovering above a keyboard, about to be clicked by a cursor.
Tech Stocks

Down 33%: Is This Canadian Tech Stock Set for a Massive Comeback?

This tech stock has a strong and stable outlook ahead, but it might take a year or two to fully…

Read more »

bulb idea thinking
Tech Stocks

The Smartest TSX Stock to Buy With $1,000 Right Now

Down 64% from all-time highs, Docebo stock has significant upside potential and is poised to deliver outsized gains.

Read more »

A microchip in a circuit board powers artificial intelligence.
Tech Stocks

3 Artificial Intelligence (AI) Stocks I’d Buy in the Tech Sell-off

Canadian car parts company Magna International (TSX:MG) is using AI effectively.

Read more »