Can Alimentation Couche-Tard Inc. Rise Another 800%?

Alimentation Couche-Tard Inc. (TSX:ATD.B) returned 45% per year for the past six years. Should investors buy today for exceptional total returns?

We all want exceptional returns. Alimentation Couche-Tard Inc.’s (TSX:ATD.B) returns make any investor drool. The company rose 819% and delivered total returns of 833% in six years! This equates to a return of 45% per year. This is four times better than the average market returns of 7-10% per year.

Can Couche-Tard continue to deliver double-digit growth? First, let’s explore how it achieved exceptionally high growth in the past few years.

How did Couche-Tard achieve high growth?

Couche-Tard has a track record of successfully integrated acquisitions. As of November 2015, Couche-Tard has integrated more than 5,400 stores from 49 acquisitions.

As of October 2015, Couche-Tard had a network of more than 8,000 convenience stores across North America, of which more than 6,500 offer road transportation fuel. In Europe, the company has more than 2,200 stores across Scandinavia, Poland, the Baltics, and Russia. Many of those stores offer road transportation fuel and convenience products.

In February, Couche-Tard acquired Topaz Energy Group, which is the leading convenience and fuel retailer in Ireland with 444 stations across the island.

Another focus of Couche-Tard is the improvement of same-store sales by catering to customer needs, focusing on key products (food, coffee, cold beverages, fuel, and car washes).

Couche-Tarde also has a disciplined culture to keep costs under control. For example, in its November presentation it stated, “For fiscal 2015, operating, selling, administrative and general expenses increased by only 0.8% compared with fiscal 2014.”

Amazing dividend growth

Some investors would pass Couche-Tard right by because of its tiny dividend yield of 0.5%. However, when looking closely, since 2010 the company has actually increased its dividend by 30.6% on average per year! Couche-Tard’s last hike at the end of 2015 was 22.7%, which was still exceptional.

Based on Couche-Tard’s quarterly dividend per share of 6.75 cents and its fiscal year 2015 earnings per share, its payout ratio is only 12.4%.

Conclusion

While Couche-Tard continued to expand and improve, it consistently recorded a return on equity (ROE) of over 20% for the past six years. In fact, in the fiscal year 2015 the convenience-store leader achieved an ROE of 24.9%.

Couche-Tard is more than an acquisition-growth story. It also looks for ways to improve its profitability, efficiency, and to keep costs under control.

Couche-Tard has already grown from a market cap of about $3.6 billion six years ago to today’s $33.1 billion. So it wouldn’t be reasonable to expect it to grow 45% per year in the next six years. However, growth in the range of 12-14% is possible.

Couche-Tard is a good growth stock; however, at about $58, it’s not cheap as it trades at 21.7 times its earnings. Prudent investors should consider buying if it dips to $45-52.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Kay Ng has no position in any stocks mentioned. Alimentation Couche-Tard is a recommendation of Stock Advisor Canada.

More on Dividend Stocks

young woman celebrating a victory while working with mobile phone in the office
Dividend Stocks

3 CRA Benefits Most Canadians Can Grab in 2024

You can save on taxes by claiming the dividend tax credit on Fortis Inc (TSX:FTS) shares.

Read more »

Two seniors float in a pool.
Dividend Stocks

TFSA: How to Earn $1,890 in Annual Tax-Free Income

Plunk these investments into your TFSA to earn passive income and avoid the taxman.

Read more »

Engineers walk through a facility.
Dividend Stocks

1 TSX Stock I Wouldn’t Touch With a 10-Foot Pole

AtkinsRéalis (TSX:ATRL) is one TSX stock I'd never invest in.

Read more »

edit Woman in skates works on laptop
Dividend Stocks

3 No-Brainer Stocks to Buy Under $30

These three stocks all offer a huge deal for investors looking for dividends, as well as growth that will last.

Read more »

You Should Know This
Dividend Stocks

How to Convert a $300 Monthly Investment Into $338 in Monthly Income

If you want a certain amount in monthly passive income, invest a similar amount today and leave the rest to…

Read more »

Increasing yield
Dividend Stocks

3 Income Stocks With Big Yields to Consider in April 2024

If you haven’t yet made your March investments, here are three income stocks to buy the dip and lock in…

Read more »

Senior Man Sitting On Sofa At Home With Pet Labrador Dog
Dividend Stocks

RRSP Investors: Don’t Miss Out on This Contribution Hack!

This hack has so many benefits for you -- not just when you put it in your RRSP but for…

Read more »

A red umbrella stands higher than a crowd of black umbrellas.
Dividend Stocks

Passive Income: 2 Safe Dividend Stocks to Own for the Next 10 Years

Dividend stocks such as Manulife and Fortis can help you generate a stable and recurring passive-income stream.

Read more »