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

artificial intelligence AI data deep processing
Tech Stocks

TFSA Buy Alert: This AI Stock Could Turn $7,000 Into $22,000 by 2030

Canadian investors should consider holding undervalued tech stocks such as AMD in the TFSA to generate outsized gains.

Read more »

Group of people network together with connected devices
Tech Stocks

If I Could Buy and Hold Only a Single Stock, This Would Be it

If there's one industry that's already proven itself, it's this one. And this tech stock is proving again and again…

Read more »

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

How to Invest in Canadian AI Stocks for Long-Term Gains

Artificial Intelligence stocks are the new goldmine, but approaching them in the right way is the key to capturing long-term…

Read more »

A chip in a circuit board says "AI"
Tech Stocks

The Best AI Stock to Invest $1,000 in Right Now

Let's dive into why Docebo (TSX:DCBO) could be one Canadian AI stock investors are overlooking in this current environment.

Read more »

Blocks conceptualizing Canada's Tax Free Savings Account
Dividend Stocks

Where to Invest Your $7,000 TFSA Contribution for Long-Term Gains

Whether it's infrastructure, real estate or tech, these three stocks offer a promising addition to your TFSA.

Read more »

up arrow on wooden blocks
Tech Stocks

3 Brilliant Growth Stocks to Buy Now and Hold for the Long Term

If you have a long-term horizon to invest, consider investigating these three growth stocks.

Read more »

Circuit board with glowing lines
Tech Stocks

3 Tech Stocks I’m Looking to Buy in March

Tech stocks certainly can offer growth, as well as risk. Yet these three tech stocks offer more of the former,…

Read more »

Piggy bank with word TFSA for tax-free savings accounts.
Tech Stocks

CRA: Here’s the TFSA Contribution Limit for 2025

Here's why TFSA investors can own TSX tech stocks such as Descartes and Enghouse in their portfolios right now.

Read more »