Is Dollarama a Great Stock for Retirement Planning?

Here’s why I think Dollarama is an amazingly reliable stock for retirement portfolios.

| More on:
Retirement plan

Image source: Getty Images

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.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. Fool contributor Jitendra Parashar has no position in any of the stocks mentioned.

More on Dividend Stocks

Golden crown on a red velvet background
Dividend Stocks

Here Are My Top 5 Dividend Aristocrats to Buy Right Now

Canadian National Railway (TSX:CNR) is a Dividend Aristocrat with 27 years of dividend growth.

Read more »

Woman has an idea
Dividend Stocks

The Smartest Canadian Dividend Stocks to Buy With $500 Right Now

Besides their years-long dividend-growth track record, the strong fundamentals of these Canadian dividend stocks make them really attractive to buy…

Read more »

retirees and finances
Dividend Stocks

No, the CPP Didn’t Squander $46 Billion of Taxpayer Money

The Globe and Mail claimed that the CPP Board mismanaged Canadians' money, but it beat the returns earned by the…

Read more »

Dial moving from 4G to 5G
Dividend Stocks

Better Buy: Telus or BCE Stock

BCE (TSX:BCE) has a higher dividend yield than Telus (TSX:T). Is it a better buy?

Read more »

A close up image of Canadian $20 Dollar bills
Dividend Stocks

This High-Yield Dividend Stock Is a Monster Passive-Income Machine 

This top TSX dividend-growth stock offers a 7.4% yield.

Read more »

Hourglass projecting a dollar sign as shadow
Dividend Stocks

For a Shot at $5,000/Year in Passive Income, Buy 6,850 Shares of This TSX Stock

Whitecap Resources is a monthly dividend stock that offers you a tasty dividend yield while trading at a cheap valuation.

Read more »

edit Balloon shaped as a heart
Dividend Stocks

Love Value Stocks? 2 That Are Screaming Buys in May 2024

Patience can pay off by investing in these two value stocks with nice dividends and the potential to turn around.

Read more »

Senior Couple Walking With Pet Bulldog In Countryside
Dividend Stocks

2 Everlasting Canadian Stocks for Your RRSP

The Canadian National Railway (TSX:CNR) stock is worth owning for the long haul.

Read more »