The contribution limit for TFSA (Tax-Free Savings Account) investors has increased to $6,500 in 2023 to keep up with inflation. A popular registered account among Canadians, the TFSA can be used to hold a variety of qualified investments across asset classes such as bonds, shares, and exchange-traded funds.
With the selloff surrounding equity markets having dragged valuations of companies across sectors lower, investors can buy undervalued dividend stocks right now and benefit from outsized gains.
One such TSX stock you can buy in April 2023 is Softchoice (TSX:SFTC). Let’s see why.
Is Softchoice stock a TFSA buy right now?
Softchoice designs, implements, and manages multi-vendor IT environments essential to the operations of its base of enterprise clients. Valued at a market cap of $1 billion, SFTC stock is part of a highly fragmented IT solutions market.
The IT solutions in North America already exceeds $1 trillion and is forecast to grow 7% annually through 2025. Softchoice now expects its total addressable market in 2022 to surpass $300 billion, providing it with enough room to expand its top line, given the company ended 2022 with $1.26 billion in sales.
In the last 12 months, Softchoice reported adjusted EBITDA (earnings before interest, tax, depreciation and amortization) of $82 million, indicating a margin of 6.5%. It reported a net income of $22 million in 2022 compared to a loss of $10 million in 2021. Additionally, free cash flow rose 22% to $72 million, allowing the company to pay shareholders annual dividends of $0.44 per share.
Softchoice offers investors a tasty dividend yield of 2.5%, and these payouts have risen by 57% since December 2021. It has enough room to keep raising dividends, as Softchoice has a payout ratio of less than 30%.
What’s next for SFTC stock and investors?
Softchoice has a diversified base of customers, with the commercial segment accounting for 53% of sales, followed by small and medium businesses at 37% and enterprise at 10%. Softchoice explains commercial clients generate between $2 million and $10 million in annual sales, while enterprise customers generate over $10 million in annual sales. Comparatively, SMBs generate less than $2 million in sales each year.
With more than 4,750 customers, Softchoice believes its go-to-market strategies have driven customer engagement rates higher. Around 59% of its revenue is recurring in nature, while its revenue-retention rate stood at 106%. So, in the last 12 months, existing customers increased spending by 6% on average.
Softchoice is quite optimistic about delivering long-term growth, as it has penetrated less than 5% of its target market. There is also a significant opportunity for the company to gain wallet share from existing customers, as companies continue their digital transformation journeys.
Valued at 0.7 times forward sales and 16 times forward earnings, Softchoice is very cheap. Analysts tracking the TSX tech stock expect its earnings to rise by almost 14% annually in the next five years, which should also support higher dividend payouts. SFTC stock went public in May 2021 and is down 15% since its initial public offer. It’s currently trading at a discount of 10%, given the consensus price target.
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
