Canadian Tire (CTC) & Dollarama (DOL): 2 dividend-paying stocks to buy

Summary

  • The consumer goods industry, after a temporary halt at the outbreak of the pandemic, are adapting to the new normal
  • These two companies have a good dividend history
  • Read to know more

The consumer goods comprise products like personal care, textile, processed food, and sporting equipment. This sector is a crucial component of the Canadian economy. It accounts for a large part of manufacturing activities and contributes to employment.

Here are two big Canadian consumer companies – Canadian Tire (TSX: CTC) and Dollarama (TSX: DOL), which are adapting to the new post-pandemic world, regaining momentum after a temporary hiccup in the business operations. They are scheduled to roll out the next dividend payouts from cash and profits generated from the business operations soon.

Canadian Tire Corporation Limited (TSX: CTC)

The C$ 11.75-billion company (market cap at the time of writing it), started as a single store in Toronto, has grown into a national brand with more than 1700 retail stores. Today Canadian Tire Corporation (TSX: CTC) has expanded operations to financial services, retail and real estate wing CT REIT. The retail division deals with industrial and casual wear and is emerging as a hockey speciality store catering to elite sports.

The scrip closed at C$ 250 on July 29, 2021, down 3.89 per cent from its previous close of C$ 260.14.

Following this surge, the stock spiked by 29 per cent in the last nine months and jumped nearly 55 per cent over the past year. However, the stock price only increased by 14 per cent on a year-to-date (YTD) basis. 

The investors have been awaiting the next quarterly dividend, set to be paid on August 01, 2021. It is expected that a dividend of C$ 1.175 apiece would be paid. It is currently yielding 1.88 per cent. Dividends have been growing, with the five-year dividend growth rate being 17.43

The consolidated financial statements presented, revenue of C$ 3,322.9 million in the first quarter of FY2021, increased from revenue of C$ 2,848.3 million in the first quarter of fiscal year 2020, up 16 per cent year-over-year (YoY).

The net income stood at C$ 186.4 million in Q1 FY2021.

The loyalty program designed by the company attracted over 400,000 new members in the first quarter of 2021, increasing the average spend and driving brand engagement.

The consumer cyclical company holds an earning per share (EPS) of 11.26, return on equity (ROE) of 21.69 per cent, as per TSX.

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Dollarama Inc. (TSX: DOL)

Dollarama Inc (DOL) operates discount retail stores across Canada, dealing with a range of everyday consumable products at fixed low price points. These stores are located in small towns and mid-sized cities.

The stock closed at C$ 58.69 apiece on July 29, 2021, and spiked up 14 per cent over the past six months and it peaked up by 22 per cent over the past year.

The stock is trading nearly 29 per cent above its 52-week low of C$ 45.42(November 02, 2020) and nearly 0.27 per cent above its 52-week high of C$ 58.53 (April 21, 2021)

The company announced a quarterly dividend of C$ 0.05 apiece to be paid on August 06, 2021, to its investors. The Ex-date being July 08, 2021, while the payable date is scheduled nearly a month later (August 06, 2021).

The dividend yield was 0.34 per cent, and the average five-year dividend growth is 7.88 per cent.

The quarterly statement reported sales of C$ 954.2 million in Q1 FY2022, up by 13 per cent YoY, increased from C$ 844.8 million in Q1 FY2021. The net earnings stood at C$ 113.6 million or C$ 0.37 on a per share basis in Q1 FY2022.

The continuous surge in the number of pandemic cases and strict health protocols laid down by the provincial government changed consumer buying habits and impacted the company’s operation.

The requirement to stay indoors and banning the sale of non-essential goods in Ontario, where the majority of the stores are located, had an immediate impact on Dollarama’s sales.

Dollarama Inc stands on an EPS of 1.91, price-to-earnings (P/E) ratio of 30.80, return on assets (ROA) being 14.95 per cent.

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