May wasn’t a very good year for Canadian Tire (TSX:CTC.A) stock. Its downward motion was driven by the bear market momentum that started in mid-April and pushed the value of the company down by 8% in a span of a single month.
However, the stock started to turn things around in the end, and June might see the opposite trend – upward. If you wish to ride that upward momentum, you may consider adding this stock to your portfolio in June 2023.
Canadian Tire has a highly diversified business and about 13 different banners under its name. Its primary business has been retail since the inception of Canadian Tire over a hundred years ago. As time passed, it acquired other well-known names like Mark’s, with its 380 stores across the country and 295 gas station locations under the Canadian Tire Gas+ banner.
It also has a REIT that owns and operates a portfolio of over 350 properties as well as a strong financial division with over 2.1 million customers. This diversified business model is one of the primary strengths of Canadian Tire as a company. Some of the names under the Canadian Tire banner are household names in various Canadian markets with a loyal consumer base.
Canadian Tire stock can be counted among the blue-chip stocks in the country. It’s large-cap and represents a century-old business. It usually offers a healthy mix of capital appreciation potential (if you are holding it long term) and dividends; and right now, it’s also offering good value and a modest discount.
The stock is trading at a price almost 20% lower compared to its 2021 peak. The discount would have been much more prominent if the stock hadn’t started a recovery journey at the beginning of the year, pushing its value up by 14.8%. It’s currently quite fairly valued and is also offering a healthy 4.1% yield.
The yield is just one attractive feature of its dividends. The company’s payouts are also quite financially healthy, and the payout ratio hasn’t grown beyond 44% in the last decade. CTC.A has also been increasing these financially stable dividends for 12 consecutive years, earning it the title of an aristocrat.
As for the capital appreciation potential, the stock rose by about 102% in the last decade. The growth was throttled by a post-COVID correction, or it would have been higher. Assuming the stock remains bullish from now on and for a relatively long time, buying it now and locking in a good yield may be a smart thing to do.
A stock like Canadian Tire is a good deal in almost all markets, assuming you are planning on holding it long term. However, a better time to buy the stock is when it’s still discounted and turning the corner and offering a good yield.