When it comes to investing in retail stocks, most investors have developed a tendency to shy away from the big brick-and-mortar names in recent years, and for good reason. The emergence of online e-commerce platforms and internet-based retailers have progressively reduced the titans of retail to second-rate, overpriced options that are, in many ways, out of touch with the changing tastes of consumers.
If that weren’t bad enough, mobile shopping has made onsite visits to retailers nearly extinct, leaving those traditional retailers with massive showroom floors and dwindling foot traffic.
What if there were a traditional retailer that not only “gets” what mobile commerce is doing to the industry but is also innovating the traditional retail process to fully use technology and become a market leader? That would be an incredible opportunity for long-term investors to diversify into the otherwise volatile field of retail, wouldn’t it? And what if that retailer also offers an appetizing dividend with a yield that is approaching 3%?
Interested yet? If so, then let’s take a moment to talk about Canadian Tire (TSX:CTC.A).
This is not the Canadian Tire of old
One of the first things that should strike investors about Canadian Tire is just how much the established retailer has evolved over the years. Nearly a decade ago, the company was wrought with the problems facing much of the sector: declining revenues and store traffic, a retail business that was still heavily reliant on printed weekly flyers, and a sub-par mobile experience with little on the site for mobile shoppers to purchase.
Today, Canadian Tire is a retailer at the forefront of technology. The company has adopted a series of innovative methods for customers to use technology as part of the buying process, rather than affixing the technology to display case as a selling gimmick. A prime example of this includes using driving simulators to try out tires in different weather conditions, or using a VR headset to see how a new patio set will look set against a backdrop of your yard. Even Canadian Tire’s iconic weekly flyer has been revamped, so users on smartphones have access to additional information, help, and videos relating to the products.
In short, the company has changed how it thinks of technology, and that innovation has paid dividends during earnings season.
Canadian Tire’s dividend is attractive
Just a few years ago, it was impossible to imagine Canadian Tire as a viable dividend-paying investment, but that’s exactly what the company has become. Specifically, over the past four years, the company has more than doubled its payout through a series of well-timed and much-appreciated hikes.
The current quarterly dividend provides an attractive 2.96% yield, and the most recent hike to the dividend came last month.
Canadian Tire is branching out
This is perhaps the most intriguing reason why I’m growing increasingly fond of Canadian Tire. Despite the advancements the company has made in adopting technology and garnering a loyal base of shoppers through its mobile site and rewards program, Canadian Tire is still a traditional brick-and-mortar retailer facing the same headwinds that other retailers are, particularly as mobile commerce continues to engulf the segment.
Canadian Tire’s latest initiative to counter that comes in the form of establishing its own base of brands, which are available only through the retailer in store and online. Canadian Tire has been pushing some of its house brands in recent months to this effect, even looking to acquire new brands that could aid in that venture.
The acquisition of sportswear brand Helly Hansen is a prime example of this, and the Hansen brand also coincidentally comes with a successful online distribution business already shipping to dozens of countries. It’s not hard to see that experience paving the way to further inroads across Canadian Tire’s other brands.
In my opinion, Canadian Tire represents an excellent long-term option for investors looking for a retail stock that offers income-producing potential.