This Canadian Dividend Stock Is Down 21% and Still a Forever Buy

Let’s be direct: Gildan Activewear (TSX:GIL) is one of the most compelling long-term buys on the TSX right now. The Canadian dividend stock has pulled back roughly 21%, but the business itself is executing at a high level.

Earnings are growing fast, synergies are rising, and free cash flow is expanding. Further, management just raised its three-year targets, making the dip an attractive buying opportunity for long-term investors.

Valued at a market cap of $14.8 billion, Gildan stock offers shareholders a dividend yield of 1.7%. The TSX has returned 128% in dividend-adjusted gains to shareholders over the past decade.

Here’s why it could continue to deliver inflation-beating returns in 2026 and beyond.

A retail giant

Montreal-based Gildan has been making T-shirts, fleece, and socks since 1946. Over the decades, it has built one of the most cost-efficient, vertically integrated apparel manufacturing operations in the world, with facilities across Central America and Bangladesh.

On Dec. 1, 2025, Gildan closed its acquisition of HanesBrands. This was the defining moment for the company’s next chapter.

The deal doubled Gildan’s scale by combining iconic consumer brands with its low-cost manufacturing engine.

• According to the company’s Q4 earnings call, full-year revenues from continuing operations hit a record $3.6 billion, and that only includes one month of HanesBrands’ contribution.
• Going into 2026, management is guiding for revenue of $6 billion to $6.2 billion. That’s a step-change in size.
• Gildan raised its run-rate cost synergy target to $250 million over three years, up from the original $200 million. The cadence is $100 million in 2026, $100 million in 2027, and at least $50 million in 2028.

CEO Glenn Chamandy put it plainly on the call: “We’re not stopping there. We’re going after more.”

Is the TSX dividend stock a good buy?

Yes, Q4 results were a little mixed versus street estimates. EBITDA (earnings before interest, tax, depreciation, and amortization) came in at $265.4 million against a $281.8 million estimate, and EBIT (earnings before interest and tax) margins slipped quarter over quarter.

But zoom out, and the picture looks entirely different.

• Adjusted diluted earnings per share for all of 2025 came in at $3.51, up 17% year over year.
• For 2026, management is guiding for $4.20 to $4.40, indicating growth of over 20%.
• Free cash flow is expected to exceed $850 million in 2026 and surpass $1 billion in 2028.
• The company generated FCF of $493 million in 2025, so these estimates represent massive acceleration.

Moreover, consensus EPS is expected to reach $5.37 by the end of 2027 and $6.27 by 2028. That’s a 21.3% normalized EPS CAGR over three years. If the TSX stock is priced at 25 times forward earnings, it could double over the next two years.

Put simply: Gildan stock is a growth story masquerading as a value stock.

There are two things dragging on near-term results: a temporary inventory drawdown across customer channels, and the integration of two Hanes textile facilities that are being shut down.

Management is moving production to Gildan’s lower-cost network. That creates a brief capacity pinch, which management is managing by proactively reducing channel inventory.

But by the second half of 2026 and into 2027, those headwinds flip into tailwinds. Bangladesh Phase 2 construction will begin within the next 18 months. Production from the two closed Hanes factories gets absorbed, while synergies flow through and margins recover.

The adjusted operating margin for 2026 is guided at approximately 20% with sequential improvement expected through the year.

The bottom line

Gildan is a quality Canadian manufacturer with global scale, strong brands, rising earnings, and a stock trading well below its potential.

The 21% pullback has nothing to do with the business breaking down. It has everything to do with short-term integration noise and investor impatience.

If you can hold through the noise, Gildan looks like a classic buy-the-dip opportunity on a company that’s getting stronger.

The post This Canadian Dividend Stock Is Down 21% and Still a Forever Buy appeared first on The Motley Fool Canada.

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More reading

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Fool contributor Aditya Raghunath 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.