1 Stock to Buy if the Bank of Canada Keeps Cutting Rates

Lower rates are a tailwind for tech stocks but one dividend payer in this high-growth sector is the top buy in a rate-cutting cycle.

| More on:

Economists and market observers expect a second rate cut this month and probably a few more until the end of 2024. Easing, if not moderating, inflation is the cue for the Bank of Canada to lower interest rates. The TSX hardly moved during the first cut in early June, although the index has risen 5.45% from a month ago.

Canada’s primary stock market is up 8.26% year to date, including a record high of 22,995.40 on July 16. While a rotation from tech stocks is currently happening, the sector’s growth prospects remain high due to the AI hype and the rate-cutting cycle.

One stock that should benefit from the central bank’s rate reduction campaign is Evertz Technologies (TSX:ET). The $974.9 million global technology operating in the communication equipment industry is in a strong position with potential upside in the near future.

Industry leader

Evertz Technologies manufactures broadcast equipment and provides end-to-end broadcast solutions (hardware and software) from content creation and distribution to delivery. The company caters to clients in the television broadcast, telecommunications and new media industries.

In addition to North America (U.S. and Canada), Evertz has a global presence with international and regional partners. Because of early and extensive research and development investments, the Burlington-based firm is now the leading supplier of IP and IT-based production, workflow and distribution systems to the broadcast industry.

Record revenues

Evertz markets and sells its products and services through direct and indirect sales channels, focusing on large and complex end-user customers. Its revenue comes from selling software, equipment, and technology solutions. The U.S. and Canadian markets contribute approximately 70-80% of the total revenue.

In fiscal 2024 (12 months ended April 30, 2024), revenue reached a record $514.6 million, representing a 13% year-over-year increase. International revenues climbed 50% to $176.6 million compared to fiscal 2023, while net earnings rose 10% to $71 million from a year ago. Notably, cash generated by operations jumped 169% to $144.7 million versus the previous fiscal year.

Evertz has consistently delivered profits in the last three fiscal years (an annual average of $68.65 million). Management maintains an upbeat revenue outlook for fiscal 2025 within the cloud-native technology and service business, where orders and backlog are growing.  

As of May 31, 2024, the purchase order backlog was over $295 million. Evertz will continue its R&D initiatives, primarily investing in new product developments, which has always been a key focus.

Rare gem

Very few high-growth stocks are dividend payers, but Evertz Technologies is a rare gem. Suppose you invest today. The share price is $12.80, while the dividend offer is 6.09%. The dividend payout frequency is quarterly, and the company has paid quarterly dividends within the last 10 years.  

Created with Highcharts 11.4.3Evertz Technologies PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.ca

Performance-wise, the tech stock is down 5.42% year to date, although market analysts have a 12-month average price target of $17.17 (+34.14% upside). You’d be buying on weakness and could earn two ways: price appreciation and dividends.

Investment takeaway

Lower interest rates are a tailwind for tech stocks. However, Evertz Technologies has inherent competitive advantages that ensure business growth. The tech leader is unmatched in industry experience, boasts superior solutions, and has a track record of sustainable success.

Should you invest $1,000 in TransAlta right now?

Before you buy stock in TransAlta, 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 TransAlta 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 $21,345.77!*

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 24 percentage points since 2013*.

See the Top Stocks * Returns as of 4/21/25

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 Christopher Liew has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Confidently Navigate Market Volatility: Claim Your Free Report!

Feeling uneasy about the ups and downs of the stock market lately? You’re not alone. At The Motley Fool Canada, we get it — and we’re here to help. We’ve crafted an essential guide designed to help you through these uncertain times: "5-Step Checklist: How to Prepare Your Portfolio for Volatility."

Don't miss out on this opportunity for peace of mind. Just click below to learn how to receive your complimentary report today!

Get Our Free Report Today

More on Dividend Stocks

Canadian dollars in a magnifying glass
Dividend Stocks

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

Long-term investors seeking monthly income should take a closer look at discounted Granite REIT for a generous yield.

Read more »

dividends can compound over time
Dividend Stocks

Is Fiera Stock a Buy for its Dividend Yield?

Fiera stock has one amazing dividend yield right now, but what else should investors consider?

Read more »

The sun sets behind a power source
Dividend Stocks

This Dividend Champion Has Paid Dividends for 51 Straight Years

All hail this dividend king for its proven potential to provide stable, reliable, and growing income.

Read more »

Person holding a smartphone with a stock chart on screen
Dividend Stocks

The Smartest Telecom Stock to Buy With $3,500 Right Now

Smart TFSA move? Telus stock shines for income & growth, outpacing rivals with a 7.7% dividend yield, two decades of…

Read more »

hand stacks coins
Dividend Stocks

I’d Put $7,000 in These Legendary Dividend Growers to Earn for the Next Decade

If you've got some cash for your TFSA, here are two stocks that should give you growing dividend income and…

Read more »

Blocks conceptualizing Canada's Tax Free Savings Account
Dividend Stocks

Here’s How to Catch up to the Average Canadian TFSA at Age 45

The TFSA can create immense passive income, and this dividend stock is an excellent choice.

Read more »

edit Safe pig, protect money
Dividend Stocks

How I’d Secure My Retirement With a $7,000 Investment Today

If you have the discipline to invest with a long-term strategy, here’s how you can use $7,000 in a TFSA…

Read more »

Canadian flag
Dividend Stocks

TFSA: 3 Canadian Stocks to Buy and Hold for Life

The TFSA is the perfect place to create income for years, and these three are the best Canadian stocks to…

Read more »