Over the last few months, Canadian Tire (TSX:CTC.A) has been an underperformer on the TSX, to put it lightly. Shares have gone from a high of around $190 per share to under $140 per share at the time of writing. This has been due to Canadian Tire’s recent earnings reports, which were weaker than expected.
That said, I think Canadian Tire remains among the best retail stocks in the Canadian market. The company is still profitable overall, and despite weak earnings, there’s some real long-term growth potential with this company.
So, is it a buy, sell, or hold? Let’s dive in.
Canadian Tire continues to increase its dividend
One of the reasons I’ve long liked Canadian Tire is the company’s penchant for returning capital to shareholders. Recently, the retailer announced yet another dividend increase to $1.75 per quarter, marking the 14th consecutive year of dividend increases.
The company will issue this payment on December 1 to shareholders of record on October 30. With a payout ratio under 35%, Canadian Tire’s distribution appears to be safe, making this 5%-yielding stock one to consider, on this metric at least.
Share-repurchase program also renewed
Sticking with the company’s capital return trajectory, Canadian Tire also announced earlier this month that it will continue its share repurchase program. Specifically, the company intends to buy back shares worth CAD$200 million over the required corpus for its 2024 anti-dilutive strategies.
This program is valid up till March 1, 2024, after which the company may renew this scheme. As a result of this move, the remaining shares of this company will benefit from a significant price rise, bringing profits to the current shareholders.
Big shakeup on the company’s financial side
According to recent reports, Canadian Tire has also purchased back the 20% Canadian Tire Financial Services (CTFS) stake from Scotiabank. This move will restore full control of the company over its financial services arm, enabling it to provide more value to its +11 million active loyalty members, which includes its 2.3 million credit card holders.
CFTS also plays a major role in Canadian Tire’s Triangle Rewards loyalty program. It accounts for around 75% of Canadian Tire Money (eCTM), which is issued to members yearly. Additionally, with time, the Triangle Rewards Program has the capability of driving higher sales per loyalty member, along with sustainable growth in figures.
Therefore, this reacquisition will help CTC go back to generating profits in the long term.
Bottom line
Given the strong future growth prospects of Canadian Tire, it can be said that the stock is currently trading at a bargain price. Thus, investors who are looking for companies with long-term capital appreciation can pick up this stock.
Additionally, individuals who already have this stock should consider holding on to their assets for the time being.
