With so many Canadian stocks trading well off their highs in the current market environment, savvy investors know that now is an excellent time to make investments, especially since you can get the most bang for your buck. From growth stocks to high-quality dividend stocks, plenty of the highest-quality companies are trading at massive discounts.
And while making investments in this environment is a great way to set yourself up for long-term wealth generation, if you focus on buying the best and highest-quality businesses and not just stocks because they are cheap, the potential gains you make could be astronomical and last for several years to come.
That’s why two of the best stocks to buy in this environment are Canadian Tire (TSX:CTC.A) and goeasy (TSX:GSY), both top Canadian dividend stocks with years of growth potential.
Both have earned investors impressive gains in the past, and both are trading at significant discounts now, allowing you to buy these stocks undervalued, in addition to locking in a much higher dividend yield than these two companies have historically traded at.
One of the best dividend-growth stocks in the retail space
Over the past few years, Canadian Tire has been firing on all cylinders, growing its revenue rapidly, improving its operations and watching its bottom line consistently improve.
In fact, over the last five years, including through the pandemic, Canadian Tire’s sales increased by 33%, from $13 billion to more than $17.8 billion. That’s an impressive growth rate for a company that’s already doing several billion in sales each year.
Furthermore, over that stretch, its normalized earnings per share (EPS) have increased from $10.67 to $18.75. That’s an increase of 76% in just five years at a time when the economy faced an unprecedented pandemic.
This just goes to show how well Canadian Tire has been executing in recent years and how well its growth strategy has been working.
Therefore, the fact that you can buy Canadian Tire at such a significant discount today makes it one of the top Canadian dividend stocks to buy now.
Currently, Canadian Tire is trading at a forward price-to-earnings (P/E) ratio of just 10.4 times, which is below its 10-year average of 12.9 times. Furthermore, its forward dividend yield of 3.9% is significantly higher than its 10-year average forward yield of just 2.5%.
So, given the significant discount, it’s no surprise that all six analysts covering Canadian Tire have the dividend stock rated a buy. It’s also not surprising that the average analyst target price sits at a more than 20% premium to where the stock trades today.
Considering that Canadian Tire is such a high-quality stock and has so much growth potential in the coming years, though, there’s a strong possibility this discount won’t last much longer.
So, if you’re looking to take advantage of the market selloff and buy top dividend stocks in this environment, Canadian Tire is certainly one of the best to consider.
A top financial company with years of growth potential
In addition to Canadian Tire, one incredible dividend stock that has even more long-term growth potential is goeasy.
goeasy’s growth has been spectacular the last few years, and despite the fact that it continues to expand its operations and has tonnes of long-term growth potential, near-term fears from the market have sent this stock plummeting, creating a massive opportunity for investors today.
And if you thought Canadian Tire’s growth was impressive, goeasy’s has been even more unbelievable. In the last five years, its revenue is up over 150%, and its EPS has increased by 289%. However, because it’s a financial stock that primarily deals with subprime borrowers, investors are worried about how it could be impacted in the current economic environment.
In the long term, though, goeasy continues to have a tonne of potential, which is why the discount today is too significant to ignore.
Right now, goeasy’s forward P/E ratio is just 7.6 times, which is well below its 10-year average of 10.4 times. Furthermore, its forward yield is roughly 3.5% — well above its average yield over the last 10 years of 2%.
Therefore, while this unbelievable dividend growth stock is trading undervalued, it’s one of the best investments that Canadians can make today.
