2 TSX Winners You Can Buy Today and Should Never Sell

Investors can buy and should never sell two TSX winners for their recession-resilient business models and consistent earnings growth.

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Successful stock investing isn’t about making money in the short term but riding on winners that will deliver superior returns over time. They are mostly large-cap stocks, companies with market capitalizations between $10 billion and $200 billion.

Alimentation Couche-Tard (TSX:ATD) and Dollarama (TSX:DOL) are two TSX winners you can buy today and never sell. Both stocks will continue winning for years because of consistent earnings growth and stability. Their returns in 10.1 years are 596% and 630.2%, respectively. Although the dividend yields are modest (not even 1%), you have peace of mind.

Unmatched size and scale

Couche-Tard is far from maxing out its value owing to abundant growth prospects in the convenience store and fuel retail industries. The $64.8 billion enterprise is present in 24 countries and small-size operators can’t match its size and scale (14,300 stores, and still expanding and integrating acquisitions). At $66.01 per share (+11.19% year to date), the dividend yield is 0.84%.  

According to management, convenience stores are recession-resilient, as evidenced by the retailer’s 5% and 8% sales growth during the dot-com bubble (2000) and Great Recession (2009), respectively. It adds that Couche-Tard has the flexibility to offset industry headwinds due to significant scale and geographic diversification.

In the first three quarters of fiscal 2023 (nine months that ended January 29, 2023), total revenues and net earnings increased 19.9% and 9.7% year over year to US$55.6 billion and US$2.4 billion, respectively. However, in Q3 fiscal 2023, net earnings declined 1.2% to US$737.4 versus Q3 fiscal 2022.

Its CFO, Claude Tessier, said, “Our results for the third quarter of fiscal 2023 reflect the effective execution of our cost optimization initiatives.” She adds that the company’s financial position remains strong. Furthermore, it repurchased nearly 27 million shares during the third quarter and about 62 million shares over the past four quarters. 

Couche-Tard aims to become the world’s preferred destination in convenience and mobility. The blockbuster deals in 2023 include the acquisition of 112 MAPCO Express stores in the U.S. and 2,193 retail sites of a European fuel giant TotalEnergies.

Its President and CEO, Brian Hannasch, said, “We believe our European model that we have, both on the food and merchandise side, that we’ve evolved over the last decade, will resonate in these markets.” If completed, Couche-Tard’s Europe footprint will grow to 80%.

Resilient business model

You don’t need to time the market to buy Dollarama because of its solid financial performance and compelling value. At $84.51 per share, current investors are up 6.9% year to date and partake in the 0.34% dividend. The Board recently approved a 30% dividend increase.

The net income of this $24-billion dollar store retail chain and merchandiser has been rising tremendously since 2020. In 2021, it grew 17.5% to $663.2 million from $564.3 million. For 2022, the net income climbed 20.5% year over year to $801.9 million. Despite supply chain and inflationary pressures, earnings per share (EPS) grew 20% versus fiscal 2022.

Dollarama President and CEO, Neil Rossy, said the remarkable performance last year indicates a resilient business model. Another solid growth driver is Dollarcity, which now has 350 stores in Latin America.

Common strengths

Couche-Tard and Dollarama are solid investment choices for long-term investors. The common denominators are recession-resilient businesses and consistent earnings growth.

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 Christopher Liew has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alimentation Couche-Tard. The Motley Fool has a disclosure policy.

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