One company I have liked for quite some time in the Canadian retail space is Canadian Tire Corporation (TSX:CTC.A) for long-term investors considering a multi-decade investment. The company remains as immune as a retailer can be to e-commerce pressures. Canadian Tire has made more strides to become e-commerce friendly than many of its peers in the retail space, offering a gamete of options for customers looking to pick up in-store or have certain products delivered. These programs are likely to pay dividends in the long-term as customers look for increasingly convenient ways to purchase goods and services.
Strong earnings and financials
From the perspective of a long-term investor, there’s also a lot to like about the company’s strong balance sheet and financials, which continue to get better over time. In Canadian Tire’s most recent earnings release, the company reported top and bottom line increases of 11% and 4%, respectively, with EPS growth of more than 21% – staggering results compared to other retailers who are fighting to get low-single-digit growth in this environment.
Another key aspect of the company’s recent earnings report that should be highlighted here is a 15% dividend increase to Canadian Tire shareholders.
For income investors, the fact that Canadian tire has increased its annual dividend distribution by an average of 15.7% per year since 2008 should speak for itself. I’m a huge fan of any company that can continuously increase its dividend distribution in the double-digit range – a 15% per year clip is incredible, and all indications are that this will continue indefinitely, making Canadian Tire a very unique opportunity indeed.
Fellow Fool contributor Nelson Smith has recently highlighted one interesting aspect of Canadian Tire’s business model – its balance sheet of financial assets including credit card balances.
Canadian Tire has been in business for decades. As one of Canada’s longest standing retailers of home and garden items, the company has built quite a base of credit for consumers and businesses alike. The company earns a very nice rate of return on this business, and like other Canadian financial institutions, is indeed benefiting from strong economic growth in the Great White North.
The degree to which the company may be “over-levered” to the Canadian consumer may be overstated by Mr. Smith, as Canadian Tire holds a diversified portfolio of financial assets spread across consumers and businesses in all regions of the country, making the firm’s financial portfolio more diversified, in some sense, than some of the lending portfolios of small regional Canadian banks.
The long-term prognosis for Canadian Tire remains solid regardless of what economic environment stands ready to greet investors for the decades to come. I consider Canadian Tire a top 10 long-term bet for investors willing to put money away to grow for a long period.
Stay Foolish, my friends.
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 Chris MacDonald has no position in any stocks mentioned in this article.