The Motley Fool

Why Investors Should Turn to Quebec in Tough Economic Times

The Canadian market appears to be in full retreat right now, and investors are wondering where they can safely put new money to work. The answer may lie in Quebec, where two Canadian retail names have emerged from modest beginnings to become full-blown super stars.

Here are the reasons why investors should consider Dollarama Inc. (TSX:DOL) and Alimentation Couche-Tard Inc. (TSX:ATD.B) right now.


As a third-generation retailer, Larry Rossy had 80 years of family experience to rely on when he opened the first Dollarama store in Matane, Quebec, in 1992.

Rossy offered items for $1 apiece and the concept has been a hit with bargain shoppers ever since.

Today, Dollarama has more than 900 stores across Canada and sells items for as much as $3 a pop. The growth has been phenomenal and the company shows no signs of slowing down.

In its most recent earnings report, Dollarama delivered year-over-year sales growth of 13% with comparable store sales increasing a healthy 7%. Operating income jumped 22% and diluted net earnings per share rose 28%.

The company pays a dividend of $0.36 per share that yields 0.44%. Investors shouldn’t be put off by the low yield because the company continues to open new stores at a fantastic rate and still raises the payout every year.

As the Canadian economy works its way through a rough patch, Dollarama is well positioned to pick up new customers and expand its sales to existing ones.

Investors have enjoyed a stellar 500% return over the past five years. Some analysts say the stock is getting expensive, but the company continues to deliver solid results.

Alimentation Couche-Tard

Another Quebec-based retail champion is conquering the global convenience store market one country at a time.

Alimentation Couche-Tard has nearly 8,000 convenience stores located in Canada and the U.S., including more than 6,400 locations that sell fuel.

In Europe, Couche-Tard operates a broad retail network of more than 2,200 stores spanning the Scandinavian countries, Poland, the Baltics, and Russia. The company also operates an additional 4,700 stores under licensing agreements in 12 other countries including China, Indonesia, Mexico, and Malaysia.

All-in, the company’s vast network has almost 15,000 stores.

Earnings continue to grow at an impressive rate as the company expands its global footprint through acquisitions and organic growth.

Couche-Tard pays a dividend of $0.22 per share that yields about 0.4%. Like Dollarama, the company is investing heavily in its expansion while giving shareholders a growing cut of the earnings.

Investors have enjoyed a 700% gain in the stock over the past five years, and the momentum shows no sign of slowing. Diluted net earnings for fiscal 2015 hit $1.80 per share, a 33% increase over fiscal 2014.

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

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