Investing in beaten-down dividend shares permits you to profit from the next yield and potential capital positive factors when market sentiment recovers.
As dividends aren’t assured, it’s important to determine corporations which are essentially sturdy and have showcased a capability to keep up their payouts throughout enterprise cycles.
On this article, I’ve recognized one undervalued TSX inventory that provides you a ahead yield of 1%. Down 67% from all-time highs, Pollard Banknote (TSX:PBL) sells lottery and charitable gaming merchandise globally, together with prompt tickets, pull-tab tickets, and bingo paper. The corporate presents digital gaming options, together with eInstants and iLottery platforms, merchandising machines, loyalty applications, and lottery administration providers.
Regardless of the continued drawdown, the TSX inventory has greater than tripled shareholder returns over the previous decade. Right here’s why I’m bullish on this small-cap inventory proper now.
Is that this TSX dividend inventory purchase?
Pollard Banknote delivered strong second-quarter outcomes, showcasing the diversification and resilience of its enterprise mannequin. Within the quarter led to June, it reported mixed income of $174.8 million, which incorporates gross sales from the NeoPollard three way partnership.
The standout performer stays the NeoPollard Interactive three way partnership, which has posted file outcomes for the second consecutive quarter.
Robust digital prompt ticket gross sales in Virginia and North Carolina drove the distinctive efficiency, because the three way partnership contributed $17.7 million in earnings in comparison with $14.1 million within the prior yr interval. These long-term contracts are producing significant money circulate that’s anticipated to proceed into the upcoming decade.
Administration stays targeted on bettering prompt ticket margins by means of strategic pricing and operational effectivity initiatives. Whereas bodily ticket volumes remained regular, common promoting costs elevated considerably, reflecting the impression of repriced contracts that now cowl roughly 75% of the enterprise. The corporate is specializing in higher-margin gross sales slightly than lower-value quantity, which ought to drive revenue margins larger.
Pollard efficiently expanded its charitable gaming footprint by means of the Pacific Gaming acquisition, including handheld digital bingo gadgets to enrich its buy of bingo dauber producer CJ Venne final yr.
Income synergies are on observe as the corporate cross-sells printed merchandise alongside digital options, making a complete suite of choices for the charitable gaming market.
The Kansas iLottery operation accomplished its first full quarter and continues to satisfy expectations because the participant base builds. A number of formal requests for proposals stay energetic, together with alternatives in Massachusetts and Belgium, as lotteries more and more acknowledge iLottery as vital for long-term success.
Wanting forward, administration expects considerably larger prompt ticket volumes within the third quarter, as buyer orders that have been beforehand shifted from earlier durations are actually flowing by means of manufacturing schedules.
Is the TSX inventory undervalued?
Pollard Banknote has elevated gross sales from $246.4 million in 2016 to $557 million in 2024. Analysts forecast the highest line to extend to $640 million in 2027. Furthermore, adjusted earnings are forecast to develop from $1.47 per share in 2024 to $2.39 per share in 2026.
Bay Avenue additionally estimates free money circulate to extend from $48.36 million in 2024 to $69 million in 2026. Given an annual dividend of $0.20 per share, Pollard Banknote ended 2024 with a payout ratio of simply over 20% which isn’t too excessive. Its payout ratio is predicted to say no to eight% by 2026.
In November 2025, the TSX inventory trades at a ahead price-to-earnings a number of of 10 occasions, which is under the historic common of 21.5 occasions. If Pollard Banknote trades at 15 occasions ahead earnings, it might achieve 75% over the following 12 months.
