Dollarama (TSX:DOL) is a blue-chip TSX stock that has generated significant returns to shareholders after it went public in October 2009. Since its IPO (initial public offering), DOL stock has returned a staggering 4,170% to shareholders after adjusting for dividend reinvestments. It means a $100 investment in the TSX stock soon after its IPO would be worth more than 4,200% today.
Valued at a market cap of $37 billion, Dollarama is one of the largest companies in Canada. Let’s see if the discount retailer can continue to deliver outsized returns to shareholders.
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An overview of Dollarama
Dollarama ended the fiscal first quarter (Q1) of 2025 with 1,569 stores as it opened 18 net new stores in the quarter. With an average size of 10,430 square feet and a broad assortment of consumable products, Dollarama sells general merchandise and seasonal items at compelling prices of up to $5.
Each Dollarama store is corporately operated which provides the consumer with a consistent shopping experience. Moreover, these stores are located in high-traffic regions that include metropolitan areas, mid-sized cities, and small towns.
Dollarama also operates an online store, which provides users with the convenience of purchasing products in large quantities that may not be available in-store.
A strong performance in Q1 of 2024
Due to its lower product prices, Dollarama thrives across market cycles and is fairly recession-resistant. Despite a challenging macro environment, Dollarama increased sales by 8.6% year over year to $1.41 billion in Q1 (ended April). Its comparable store sales grew 5.6% over and above the 17.1% growth in the year-ago period.
Dollarama explained that it continues to see a normalization in comparable store sales with growth driven by higher than historical demand for core consumables and everyday essentials.
Dollarama’s EBITDA (earnings before interest, tax, depreciation, and amortization) margin improved to 29.7%, up from 28.3% last year, showcasing an ability to increase margins amid inflation.
Dollarama’s operating margin also improved by 80 basis points to 22.2%, allowing it to increase earnings by 22.2% to $0.77 per share.
A widening earnings base generally translates to higher dividend payouts. Dollarama currently pays shareholders an annual dividend of $0.37 per share, indicating a forward yield of 0.28%. While the yield is quite low, the company has raised its dividends by 15% annually in the last 13 years, which is exceptional.
Dollarama increases stake in Dollarcity
In its earnings release, Dollarama announced it acquired an additional 10% equity interest in Dollaracity, a value retailer based in Latin America. It now owns 60.1% of Dollarcity and has expanded the partnership to countries like Mexico.
Dollarama chief executive officer and president Neil Rossy stated, “Like Dollarama in Canada, the Dollarcity value proposition is resonating with consumers in LATAM. The increase in Dollarcity’s long-term target to 1,050 stores by 2031 in their current four countries of operation speaks to the untapped growth potential in these markets and, more broadly, the relevance of our retail model across geographies and demographics.”
Dollarcity opened 15 net new stores in Q1, an increase from the eight net new stores it opened last year.
What is the target price for Dollarama stock?
Dollarama stock might seem expensive at 32 times forward earnings. However, analysts expect earnings to expand by over 14% annually in the next five years.
