As the stock market in Canada is going through a tough phase in 2023, more investors than ever are looking to protect their investments. The ongoing macroeconomic worries have driven the main TSX benchmark down by more than 6% in the last 30 sessions.
One of the easiest ways to protect your portfolio from drastic downturns is to add some defensive stocks, like Dollarama (TSX:DOL), to it that can help you get steady returns over the long term. Interestingly, DOL stock currently trades with handsome 21.3% year-to-date gains at $95.06 per share with a market cap of $27.2 billion, despite the ongoing broader market selloff.
Let me quickly give three main reasons that make Dollarama such a great stock to buy today and hold forever.
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Dollarama’s reliable business model
If you want to protect your stock portfolio from drastic broader market downturns, it’s highly recommended that you hold some well-established, large-cap stocks in your portfolio that have reliable business models. This is because such companies have the ability to consistently generate revenues and maintain profitability, even during temporary economic weakness.
For example, the demand for Dollarama’s affordable products tends to remain stable despite economic downturns or periods of financial uncertainty. As consumers become more budget-conscious during such tough times, they often seek value-driven options, making discount retailers like Dollarama an attractive shopping destination for them. This inherent resilience in demand highlights the defensive nature of Dollarama’s business model, which makes DOL a great defensive stock to buy today.
Expanding business and strong financial growth
Even as many businesses, including large retailers, globally have struggled in the last few quarters due to changing consumer spending patterns, Dollarama’s financial growth has remained stellar.
To give you a quick idea about that, in the first two quarters (ended in July) of its fiscal year 2024, the Canadian value retailer’s total revenue rose more than 20% YoY (year over year) to $2.8 billion. More importantly, its adjusted earnings during the same six months jumped by nearly 30% YoY to $1.49 per share. Dollarama’s management attributed its strong operational and financial performance to its “differentiated ability to provide compelling value across our broad product mix and a consistent shopping experience.”
Given slowing economic growth, the company expects the demand for its affordable everyday products to remain strong in the second half of its fiscal year 2024, which should help it deliver consistent financial growth.
A stock with an exceptional track record
The last, but not the least important, reason that makes DOL stock a screaming buy today is its exceptional track record of delivering value to its shareholders. Even if we exclude its strong gains in 2023 so far, Dollarama stock delivered strong double-digit positive returns to investors in 12 out of the previous 13 years between 2010 and 2022. With this, DOL stock has popped by 541% in the last 10 years alone.
So, if you want to see your hard-earned savings grow steadily over the long run, DOL stock could be an amazing stock to buy now and hold for decades.
