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Dollarama (TSX: DOL) stands out as a quality recession-resistant growth stock on the TSX, having delivered substantial returns to shareholders over the past decade. Valued at $29 billion by market capitalization, Dollarama stock presents an attractive investment opportunity, trading at a reasonable multiple and demonstrating strong performance.
As one of Canada's most recognizable brands, Dollarama operates as a discount retailer offering a diverse range of consumable products, general merchandise, and seasonal items across its 1,541 locations nationwide. Additionally, the company holds a majority interest in Dollarcity, a value retailer with a growing presence in Latin America, further expanding its market reach and growth potential. Investing in TSX dividend stocks alongside Dollarama provides investors with a balanced portfolio, combining stable income generation from dividend-paying companies with the growth potential offered by Dollarama's expanding market presence.
In fiscal Q3 2024, Dollarama reported impressive financial results, with revenue reaching $1.5 billion, representing a year-over-year increase of 14.6%. Comparable store sales surged over 11%, while EBITDA grew by 24%, amounting to $478.8 million with a margin of 32.4%. The company also reported adjusted earnings of $0.92 per share, marking a significant increase of 31.4% year over year, driven by the opening of 16 net new stores during the quarter.
Dollarama's robust performance underscores the resilience of its business model amidst challenging macroeconomic conditions, with strong consumer demand across product lines fueling double-digit same-store sales growth for the sixth consecutive quarter. Moreover, the company's strategic focus on expanding its store network has contributed to top-line growth, with the total number of stores increasing to 1,541 by the end of Q3.
Despite offering a modest quarterly dividend of $0.07 per share, resulting in a forward yield of 0.27%, Dollarama maintains a payout ratio of less than 10%, affording it ample flexibility to reinvest in growth initiatives, reduce balance sheet debt, and pursue accretive acquisitions. Over the past decade, Dollarama has more than doubled its dividends, reflecting its commitment to returning value to shareholders.
Analysts anticipate further earnings expansion for Dollarama, with adjusted earnings forecasted to rise from $2.76 per share in fiscal 2023 to $3.86 per share in fiscal 2025. Priced at 26.6 times forward earnings, Dollarama stock appears reasonably valued, particularly considering the projected annual earnings growth of 16.5% over the next five years.
In conclusion, Dollarama presents an attractive investment opportunity with its strong financial performance, resilient business model, and growth prospects, making it a compelling choice for investors seeking quality recession-resistant growth stocks on the TSX.
