A Cheap Dividend Growth Stock to Start Your TFSA Retirement Fund in 2020

Why it’s time to buy Alimentation Couche-Tard (TSX:ATD.B) before the Street recognizes how solid of a bet the staple stock is.

2020 is shaping up to be another ridiculously volatile year with the looming U.S. election. But for Foolish investors, another surge in volatility is just an opportunity to discover mispriced stocks in depths of the TSX index.

As more attention is focused on less meaningful big picture events, I’d look to individual companies making significant strides that may not be fully appreciated by the market. Consider Alimentation Couche-Tard (TSX:ATD.B), a convenience store kingpin with the urge to merge.

The company has been doing a lot of things right at the company-specific level, but such progress has largely been ignored as investors seem to be grouping stocks together with little consideration for how individual companies themselves have been faring recently.

As Couche-Tard continues bolstering its same-store sales growth (SSSG) numbers while expanding its international footprint, high double-digit earnings growth numbers are to be expected as management looks to meet its goal of doubling profitability over the next five years.

In short, Couche-Tard has been firing on all cylinders, and I don’t believe an economic downturn will be able to stop CEO Brian Hannasch and company from achieving its ambitious goals. Management continues to demonstrate that it’s capable of delivering massive returns on invested capital and via very creative ways for a company that’s typically been known as old-fashioned, low-tech, or boring.

Getting creative with comps-driving efforts

SSSG is a top performance metric to gauge how retailers are doing. And Couche-Tard has recently been impressing thanks to new food offerings in select stores and better catering to local tastes.

Couche-Tard hasn’t just been giving customers what they want, however. They’re reaching through to customers in an interactive way through engaging promos such as Circle K’s “Rock Paper Prizes” contest, which has since been rebooted to include NHL stars from various Canadian teams.

Hockey-crazy customers can now play rock, paper, scissors against the likeliness of Bo Horvat or Brad Marchand, and win daily prizes like hotdogs, chips, Frosters, buy-one-get-one (BOGO) deals, and various other high-margin items, along with a chance to win a trip to the NHL all-star game.

The goal of the promo is to get customers in stores to redeem their free items and entice them with other products while they’re in the store. Getting customers through the door is half the battle, and the contest is one of the most engaging and creative SSSG-driving initiatives I’ve seen, not to mention the contest itself is quite addicting and amusing!

A perfect stock to buy as we head into recession

As one of the few consumer staples on the TSX, Couche-Tard is a recession-resilient stock that can zig while the markets zag. The stock is inversely correlated to the broader markets with a negative beta of -0.23. Moreover, the dividend (currently yielding just 0.6%) can grow by double-digits, even amid tough economic times.

Fellow Fool Kay Ng praised Couche-Tard as a dividend stock to protect a portfolio from a recession, also highlighting the fact that the company had averaged 22% in dividend growth each year over the last 12 years.

Now that shares have corrected, I’d look to initiate a sizeable position before Couche-Tard has the opportunity to pull the curtain on results that could exceed expectations by a country mile.

Stay hungry. Stay Foolish.

Fool contributor Joey Frenette owns shares of ALIMENTATION COUCHE-TARD INC. Alimentation Couche-Tard is a recommendation of Stock Advisor Canada.

More on Dividend Stocks

hand stacks coins
Dividend Stocks

3 Top Dividend Stocks to Buy Today and Count On for Years

These top dividend stocks can maintain their current payouts and increase their distributions regardless of market downturns.

Read more »

buildings lined up in a row
Dividend Stocks

This 6% Dividend Giant Could Be the Perfect Retirement Partner

Discover how to achieve your ideal retirement. Plan ahead, invest wisely, and create multiple income sources for peace of mind.

Read more »

TFSA (Tax-Free Savings Account) on wooden blocks and Canadian one hundred dollar bills.
Dividend Stocks

Ready to Max Out Your TFSA? 2 Canadian Blue-Chip Stocks Offer Huge Growth

Two blue-chip Canadian stocks to power your TFSA with tax-free dividends and steady growth you can own for decades.

Read more »

Blocks conceptualizing Canada's Tax Free Savings Account
Dividend Stocks

How I’d Structure a $21,000 TFSA for Constant Monthly Income

Catch up from a tough few years by building constant, tax-free monthly income in a $21,000 TFSA, anchored by diversification…

Read more »

gift is bigger than the other
Dividend Stocks

Seize These TSX Stocks Before the Holiday Surge

Air Canada (TSX:AC) could benefit from Holiday shopping.

Read more »

man shops in a drugstore
Dividend Stocks

GICs Are Done: This Dividend Stock Is a Much Better Income Option

As GIC yields sink, Richards Packaging offers higher income and potential upside, without abandoning the safety investors want.

Read more »

woman looks at iPhone
Dividend Stocks

Is TELUS Stock a Buy for Its 9% Dividend Yield?

Based on free cash flow, TELUS' dividend seems sustainable. It could be a multi-year turnaround idea for patient income investors.

Read more »

dividends grow over time
Dividend Stocks

2 Gargantuan Dividend Giants That Belong in Every Portfolio

Two TSX dividend giants that deliver paycheque-like income and steady growth, so you can set it and forget it for…

Read more »