The Motley Fool

Today’s Top Buy: Alimentation Couche-Tard

Image source: Getty Images.

Alimentation Couche-Tard (TSX:ATD.B) has remained on the radar of growth investors of late. This is hardly surprising given what the company’s stock price has done (not much) of late.

Indeed, this underperformance comes despite traditionally excellent historical growth. With expectations Couche-Tard could double its net profits in the next 5 years, this doesn’t make sense. Here’s why Couche-Tard continues to be one of my top picks.

Couche-Tard’s a growth play, so forget about its dividend

Couche-Tard’s a great growth play at a very reasonable price right now. That’s hard to find. Indeed, at this valuation, there really aren’t any cheaper growth plays with this level of quality on the TSX right now that I can find.

Alimentation’s current dividend yield sits below 1% as of writing, which is certainly nothing to write home about. Additionally, the company also cut its dividend in 2019. This may dissuade some income investors from this stock.

However, Couche-Tard really is more of a growth play than an income play. The dividend is really just a freebie.

That said, there’s room to be optimistic on this front. Couche-Tard has raised its dividend twice since the aforementioned cut. It’s got the potential to continue to grow its yield in the absence of any massive deals. Right now, deal flow has been lower than usual, so this kind of move may come.

However, I think investors are hoping more acquisition-related growth is on the horizon. Indeed, this is a stock most investors buy for capital appreciation first. If dividend growth isn’t there over time, investors needn’t worry. It’s an afterthought.

Strategic diversification a positive for Couche-Tard

I think Couche-Tard is being unfairly punished by the market right now.

Yes, the company’s $20 billion takeover bid for French retailer Carrefour was a big one. Perhaps the price tag was too large, or the move into retail wasn’t expected. I get why the market was spooked.

However, I’m surprised the market hasn’t responded more kindly of late, as the deal fell apart. Either investors are happy the deal didn’t go through or not.

It appears the strategic play the company was making to move into retail was met with a lot of resistance from investors. However, as I’ve stated in the past, I think this was a very prudent move. Investors need to consider the fact that gas station revenues are likely to be in long-term decline.

Couche-Tard’s world-class management team is looking well down the road for future growth. For long-term investors, it’s nice to know the company you’re investing in has a management team that has your back.

Like Couche-Tard, but want a few other options to choose from? Here are 10 of our top picks!

The 10 Best Stocks to Buy This Month

Renowned Canadian investor Iain Butler just named 10 stocks for Canadians to buy TODAY. So if you’re tired of reading about other people getting rich in the stock market, this might be a good day for you.
Because Motley Fool Canada is offering a full 65% off the list price of their top stock-picking service, plus a complete membership fee back guarantee on what you pay for the service. Simply click here to discover how you can take advantage of this.

Click Here to Learn More Today!

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 of the stocks mentioned. The Motley Fool owns shares of and recommends ALIMENTATION COUCHE-TARD INC.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss an important event.

Iain Butler and the Stock Advisor Canada team only publish their new “buy alerts” twice a month, and only to an exclusively small group.

This is your chance to get in early on what could prove to be very special investment advice.

Enter your email address below to get started now, and join the other thousands of Canadians who have already signed up for their chance to get the market-beating advice from Stock Advisor Canada.