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In the current landscape of Canadian investment, technology and convenience stand out as popular sectors. For investors seeking diversification, retail stocks present a promising avenue, known for their resilience even in economic downturns and their ability to combat inflation. Here, we'll explore two prominent TSX retail stocks in the Canadian market offering potential for long-term growth.
Canadian Tire (TSX: CTC.A)
Canadian Tire is a renowned retailer in Canada, operating not only in the core retail segment but also in financial services through its strategic partnership with Microsoft and its real estate investment trust (REIT) called CT REIT. Established in 1922, Canadian Tire caters to various consumer needs, including living, gaming, automotive, seasonal, and gardening products.
In a notable move, Canadian Tire has entered into a seven-year strategic retail partnership with Microsoft, leveraging Microsoft Azure to enhance infrastructure and customer experience. This collaboration aims to boost digital capabilities, support innovation, and employ artificial intelligence and machine learning for operational optimization and improved customer interactions.
From a valuation perspective, Canadian Tire is currently trading at around 20% below its intrinsic value of $171.39, offering potential value for investors. While the stock has exhibited volatility, this may present opportunities for lower prices in the future, providing investors with a chance to buy at an attractive valuation.
Alimentation Couche-Tard (TSX:ATD.B)
As a global leader in convenience and mobility with operations in 25 countries, Couche-Tard is a major player in the convenience store sector, operating under banners like Couche-Tard and Circle K. With over 14,400 convenience stores and a dominant presence in retail and road fuel across various regions, Couche-Tard has established itself as a significant player in the industry.
Despite being valued at $70 billion, Couche-Tard's insiders hold a substantial stake worth US$7.4 billion, aligning their interests with shareholders. The company has demonstrated robust financial performance, with an annual earnings per share growth rate of 15% over three years, stable EBIT margins, and a 14% increase in revenue to $72 billion.
Over the past three months, Couche-Tard's stock has shown a 10% increase, and its consistent dividend payments over a decade underscore its commitment to profit sharing. Analyst estimates suggest a stable future payout ratio of 13% over the next three years, adding to its appeal for long-term investors.
Bottom Line
Both Canadian Tire and Alimentation Couche-Tard offer compelling choices for investors seeking retail stocks with robust long-term growth potential. With stable dividend payouts and a commitment to long-term value creation, these stocks align well with the interests of long-term investors looking to diversify their portfolios
