Yahoo Finance Down But Not Out: A Charming Dividend Stock Going for 22.5% Off
Written by Christopher Liew, CFA at The Motley Fool Canada
Canadian stocks have performed well thus far in 2024. As of this writing, the TSX is up 4.30% year to date compared to the 0.69% gain in the same period last year. While eight of 11 primary sectors are in positive territory, some stocks display instability or are undervalued.
Cascades (TSX:CAS) in the paper and packaging industry trades at a discount (-22.57% year to date). The marked-down share price is $9.74, although the 4.93% dividend compensates for the temporary weakness. Income-focused investors can take advantage of this buying opportunity because, besides the attractive yield, the payouts are safe.
Business overview
Cascades will celebrate 60 years of corporate existence on March 26, 2024. The $980.88 million company provides eco-friendly recovery, packaging and hygiene solutions. It produces, converts, and markets packaging and tissue products and serves the commercial, institutional, industrial retail and consumer products industries in North America and Europe.
Management announced in January of this year the launch of new produce basket designs for the produce sector. The new produce baskets with flaps are made from 100% recycled products. They are for produce growers looking for sustainable alternatives to hard-to-recycle packaging.
In February, Cascades announces an operational realignment and optimization of its Containerboard Packaging platform. The company decided not to restart operations in a corrugated medium mill and permanently close two converting plants gradually until May 31, 2024.
Cascades’s strategic investments in the Bear Island mill and its converting network prompted the abovementioned moves. However, Charles Malo, president and chief operating officer of Cascades Containerboard Packaging, said the closures will result in a $61 million impairment and environmental obligation charges in the fourth quarter (Q4) of 2023.
Furthermore, the company will incur approximately $35 million in additional restructuring charges in the coming years.
Financial performance and business outlook
In 2023, sales and operating income increased 3.9% and 21.2% to $1.14 billion and $40 million, while net loss widened to $53 million compared to $14 million in 2022.
Nonetheless, Cascades president and chief executive officer (CEO) Mario Plourde said it was a strong annual performance, given the 48% year-over-year increase in EBITDA (earnings before interest, taxes, depreciation, and amortization) to $558 million. “In the fourth quarter of 2023, our Tissue Papers and Specialty Packaging businesses generated good results, meeting expectations,” Plourde added.
For Q1 2024, Plourde expects the consolidated results to decrease sequentially due to higher raw material costs and slightly lower average selling prices in the Containerboard segment. The softer demand in the fourth quarter will also carry over, and the production levels will be lower to manage inventory.
We just revealed five stocks as “best buys” this month … join Stock Advisor Canada to find out if Brookfield Infrastructure Partners made the list!
Cascades will implement commercial strategies and cost-optimization initiatives to drive long-term profitability while increasing its platform’s agility and market responsiveness. Adding and ramping the top-tier Bear Island facility to the containerboard mill network should enhance competitiveness.
Stable dividends
Cascades’s dividend yield isn’t the highest in the market but is higher than 25% of TSX dividend stocks and the 2% industry average. The low 25.35% payout ratio indicates that the payouts are well-covered by cash flows. Expect the business to turn the corner as economic uncertainty gradually fades.
The post Down But Not Out: A Charming Dividend Stock Going for 22.5% Off appeared first on The Motley Fool Canada.
Should you invest $1,000 in Cascades Inc. right now?
Before you buy stock in Cascades Inc., consider this:
The Motley Fool Stock Advisor Canada analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Cascades Inc. wasn’t one of them. The 10 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 $15,578.55!*
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 32 percentage points since 2013*.
See the 10 stocks * Returns as of 3/20/24
More reading
Can You Guess the 10 Most Popular Canadian Stocks? (If You Own Them, You Might Be Losing Out.)
How to Build a Bulletproof Monthly Passive-Income Portfolio in 2024 With Just $25,000
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.
2024
