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 up more than 100 points in late-morning trading, helped by strength in base metal and utility stocks, while U.S. stock markets were mixed.
The S&P/TSX composite index was up 103.40 points at 24,542.48.
In New York, the Dow Jones industrial average was up 192.31 points at 42,932.73. The S&P 500 index was up 7.14 points at 5,822.40, while the Nasdaq composite was down 9.03 points at 18,306.56.
The Canadian dollar traded for 72.61 cents US compared with 72.44 cents US on Tuesday.
The November crude oil contract was down 71 cents at US$69.87 per barrel and the November natural gas contract was down eight cents at US$2.42 per mmBTU.
The December gold contract was up US$7.20 at US$2,686.10 an ounce and the December copper contract was up a penny at US$4.35 a pound.
This report by The Canadian Press was first published Oct. 16, 2024.
TORONTO – Canada’s main stock index was up more than 200 points in late-morning trading, while U.S. stock markets were also headed higher.
The S&P/TSX composite index was up 205.86 points at 24,508.12.
In New York, the Dow Jones industrial average was up 336.62 points at 42,790.74. The S&P 500 index was up 34.19 points at 5,814.24, while the Nasdaq composite was up 60.27 points at 18.342.32.
The Canadian dollar traded for 72.61 cents US compared with 72.71 cents US on Thursday.
The November crude oil contract was down 15 cents at US$75.70 per barrel and the November natural gas contract was down two cents at US$2.65 per mmBTU.
The December gold contract was down US$29.60 at US$2,668.90 an ounce and the December copper contract was up four cents at US$4.47 a pound.
This report by The Canadian Press was first published Oct. 11, 2024.
TORONTO – Canada’s main stock index was little changed in late-morning trading as the financial sector fell, but energy and base metal stocks moved higher.
The S&P/TSX composite index was up 0.05 of a point at 24,224.95.
In New York, the Dow Jones industrial average was down 94.31 points at 42,417.69. The S&P 500 index was down 10.91 points at 5,781.13, while the Nasdaq composite was down 29.59 points at 18,262.03.
The Canadian dollar traded for 72.71 cents US compared with 73.05 cents US on Wednesday.
The November crude oil contract was up US$1.69 at US$74.93 per barrel and the November natural gas contract was up a penny at US$2.67 per mmBTU.
The December gold contract was up US$14.70 at US$2,640.70 an ounce and the December copper contract was up two cents at US$4.42 a pound.
This report by The Canadian Press was first published Oct. 10, 2024.
