Alimentation Couche-Tard (TSX: ATD) is a name many investors in the consumer staples sector are likely familiar with. As the multinational operator of convenience stores and gas stations, including brands like Circle K, the company has etched a name for itself on roadside corners.
With brand name recognition and diversified revenue streams that span from your typical convenience store offerings to fuel, it’s not hard to see why this stock has also been on many investors’ radars as a lower volatility pick with a modest, but steadily growing dividend yield.
The merits of Alimentation Couche-Tard
When you think of grabbing a quick coffee, a snack, or filling up your tank, brands under the Alimentation Couche-Tard umbrella often come to mind. With thousands of stores in multiple countries, their name is synonymous with convenience – something that has been baked into the stock’s premium.
Another feather in Couche-Tard’s cap is its diversified revenue streams. The company isn’t solely reliant on convenience store sales or fuel; it has a balanced mixture of both. This diversification helps to hedge against downturns in any single area, making it somewhat recession-resistant compared to other retailers.
Augmenting this is the fact that the company hails from the consumer staples sector. People need gas and basic amenities regardless of economic conditions, making Couche-Tard a seemingly safe bet for investors seeking lower volatility.
Why I wouldn’t buy it (and what I would buy instead)
Despite these seemingly compelling reasons to invest in Alimentation Couche-Tard, I find myself hesitant to add it to my portfolio – and perhaps you should be, too. Don’t get me wrong; it’s not that Couche-Tard is a bad investment per se.
But in investing, it’s not just about finding good picks; it’s about finding the best picks for your particular financial goals and risk tolerance. And when it comes to consumer staples, I believe there are more compelling options available for Canadian investors.
Enter the iShares S&P/TSX Capped Consumer Staples Index ETF (TSX: XST), which tracks 11 TSX consumer staples stocks. Fear not, for Alimentation Couche-Tard is currently the ETF’s top holding at 26.9%.
However, you also get great exposure to other notable TSX stocks like Loblaw Companies Ltd., Metro Inc., George Weston Ltd., and Saputo Inc. in the ETF’s top ranks.
For this reason, I personally feel safer investing in the broad TSX consumer staples sector than just its current top companies. Who knows if Alimentation Couche-Tard will still reign supreme in a decade? I don’t, so that’s why I diversify.
