When you’re evaluating a Canadian stock that has fallen sharply but could generate decades of income, the key isn’t whether it rebounds next quarter — it’s whether the business can steadily earn its way back while rewarding you along the way. The best income opportunities often feel uncomfortable in the short term. The challenge is separating a stock that’s temporarily out of favour from one that’s fundamentally broken. Here’s what to consider before buying an oversold Canadian dividend stock that could be a solid long-term holding.
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Key Factors to Watch
Start by understanding why the stock is down. Short-term market weakness, temporary cost pressures, or cyclical slowdowns can create opportunities. But if the underlying issue is permanent, it’s a value trap, not a bargain.
Next, assess dividend strength — not just its size. A high yield looks tempting, but it must be sustainable. Focus on the payout ratio: under 70% of normalized earnings or free cash flow is generally comfortable for stable businesses.
Free cash flow trends are crucial. A reliable dividend stock should consistently generate surplus cash after maintenance spending. Dividends should be covered by free cash flow with room left to reinvest. Debt is another key check. A company under pressure with high leverage can’t prioritize shareholders. Ideally, look for a debt-to-EBITDA ratio below 3× and interest coverage above 4× to ensure resilience when rates rise.
Finally, valuation matters — but only after quality. A low P/E or high yield alone isn’t enough. Compare its valuation to peers and historical averages. If it’s cheap while the business remains sound, that’s a good sign. If it’s cheap because earnings have collapsed, it may stay that way.
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Why Fiera Capital Stands Out
Fiera Capital (TSX: FSZ) is a classic example of a Canadian income stock that looks oversold rather than broken. Its core business — managing money — is inherently stable, with recurring fees and predictable cash flow. When markets recover, its high operating leverage can amplify earnings.
The stock has dropped about 33% over the past year, largely due to market volatility and asset outflows. But the decline appears more emotional than structural.
Fiera manages around $155 billion in assets across equities, fixed income, private credit, and real assets, earning fees from institutional clients, pension funds, and wealthy investors. While its revenues shrink in weak markets, its track record on dividends is notable. It currently yields about 7.2%, and despite a high payout ratio, it has paid dividends consistently since its 2010 listing, rarely resorting to cuts — instead tightening operations during downturns.
Valuation is also compelling. Shares trade at roughly 7× forward earnings and an EV/EBITDA of 9 — well below historical averages — suggesting the market may be underestimating its earnings power.
Bottom Line
Fiera Capital isn’t without risks. Market swings, performance fee volatility, and integration challenges from acquisitions can all weigh on results. But for patient, long-term investors seeking steady income and potential upside, Fiera looks like a beaten-down dividend stock worth considering. At current levels, it offers both attractive yield and rebound potential.
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