Retirement planning is one of the most important aspects of financial well-being and peace of mind. However, saving for retirement can be challenging, especially in a highly uncertain macroeconomic environment. While the TSX Composite Index is currently hovering close to its all-time highs, the market may remain highly volatile in the near term as investors continue to speculate about the timing of upcoming interest rate cuts.
In such uncertain times, investors planning retirement should look for stocks that could provide steady income as well as capital appreciation over the long term. One such great Canadian stock is Dollarama (TSX:DOL). This Mont Royal-headquartered company operates a chain of discount stores across Canada. It currently has a market cap of $31.5 billion as its stock trades at $112.95 per share.
DOL stock has outperformed the broader market in 2024 so far, as it currently trades with nearly 18.3% year-to-date gains against the TSX Composite’s 5.5% rise. It currently pays an annual dividend of around $0.37 per share and distributes payouts quarterly. Interestingly, the company has raised its annual dividends by around 77% in the last five fiscal years.
In this article, I’ll explain why Dollarama could be a good stock for your retirement portfolio. Before we discuss that, let’s take a closer look at some key highlights from its recently released annual report. But first, let’s take a quick look at some key highlights from its latest financial results.
Dollarama’s fiscal year 2024 earnings
In the fourth quarter of its fiscal year 2024 (ended in January), the company reported an 11.3% YoY (year-over-year) increase in its sales to $1.6 billion, resulting in a strong over 16% rise in its annual revenue to $5,9 billion. Besides stronger demand for consumables that increased its comparable store sales, Dollarama’s strong annual sales growth could also be attributed to a higher number of total stores across Canada.
Such strong growth was not just in sales but also in profitability, with the Canadian discount retailer’s adjusted quarterly earnings soaring 26.4% YoY to $1.15 per share, beating Bay Street analysts’ expectations of $1.06 per share. Declining inbound shipping costs also led to a solid 29% YoY jump in its adjusted annual earnings for the fiscal year 2024 to $3.56 per share.
To add optimism, these positive factors, along with its continued focus on refreshing product offerings, helped Dollarama expand its adjusted net profit margin last fiscal year to 17.2% from 15.9% in the previous year.
Is Dollarama a great stock for retirement planning?
Dollarama not only met but exceeded Street analysts’ earnings expectations in the last three fiscal years, highlighting its management’s expertise in navigating retail’s often turbulent waters.
Its resilient business model is another key factor that makes it a great stock for retirement portfolios. While a tough consumer spending environment usually affects the growth of most retail businesses, the demand for Dollarama’s essential, affordable products remains strong even amid tough economic times, making it a very reliable stock to hold long term. This could be one of the key reasons why DOL stock has yielded outstanding 191% positive returns in the last five years, despite facing pandemic-related operational challenges in between.
Moreover, Dollarama’s consistent focus on expanding its network of stores and refining its operational model to boost profitability further could help its dividends grow and share prices appreciate in value over the long run, making it even more attractive for retirement portfolios.
