Investing in Loblaw Companies (TSX: L) might seem like the responsible choice. After all, it’s a large blue-chip company that offers dividends for investors. And yet, over the last few years it has been a bit more volatile, with shares surging then pulling back several times.
So today, we’re going to look at what’s been happening in the last decade, and how much $1,000 would be worth today. What’s more, let’s explore whether a runup could happen again for investors in Loblaw stock.
2013 to today
If you were an investor in Loblaw stock back in 2013, you would have purchased shares at about $38 in July of that year. Purchase $1,000 worth, and you’re looking at about 26 shares.
Fast forward to today, and each share is currently worth about $120 on the TSX today. That would mean your 26 shares are now worth $3,120! That’s total growth of 233% as of writing, and a huge improvement from your original investment.
But the question is whether this can be achieved again? It’s important to note, share prices rose steadily over the first few years after 2013. We were still in a market that was growing after the Great Recession. Yet by the time the pandemic hit, shares suddenly took a nose dive, followed by a sky-high jump.
What happened?
The pandemic at first was bad for Loblaw stock, just as it was with any other company. But investors realized that essential services were still going to be needed. This meant that Loblaw stock, and every company under its banner, could keep its doors open.
Yet the company didn’t stop there, and instead increased its already available curb-side delivery service. This revenue stream saw a large increase. Add in that the government would aid these essential service providers, and shares kept climbing.
After the pandemic restrictions started to lift, Loblaw stock started to expand further. It had already brought in Shoppers Drug Mart, but added companies like Esso to its loyalty program. The company maintained a strong position in finances as well through its PC Financial program. All together, Loblaw stock has remained a strong stock even today, with the essential provider continuing to seek growth even amidst high inflation and interest rates.
What about the future?
We aren’t about to go through another pandemic, at least I certainly hope not. But let’s assume for this case we aren’t. Loblaw stock isn’t about to see another surge like it did during the time of growth stocks related to the pandemic. During the last three years, for example, shares are up 73%. That’s simply unreasonable to think the company will do this yet again.
That’s because while Loblaw stock is currently Canada’s largest grocery provider, with many revenue streams available, the costs are also enormous. It costs a lot to set up a new grocery location, and without those new locations, there isn’t another reason for the stock to suddenly see a large influx of cash. That is, unless it acquires more. But there has been no talk of that.
Bottom line
Does this mean you shouldn’t buy it? Also not a good idea. Loblaw stock may simply return to the stability investors purchased it for in the first place. While it may not become the growth stock we once knew, that’s fine by me.
What you’re getting instead is perhaps the compound annual growth rate (CAGR) of yesteryear. Between 2013 and 2019, for example, shares increased at a CAGR of 8.9%. That’s a very solid rate. Additionally, investors can collect a dividend yield at 1.5%. So Loblaw stock should certainly be considered by investors on the TSX today.
