Food stocks are some of the most often dismissed investment options on the market. That’s a shame because some of those options, like Loblaw (TSX: L), can offer significant long-term growth potential in addition to a healthy dividend. This begs the question of where Loblaw stock will be in 5 years?
Let’s try to answer that question by taking a look at Loblaw stock in some detail.
Meet Loblaw
Most Canadians are familiar with Loblaw as the largest grocer in Canada. Specifically, Loblaw operates a dizzying array of brands and labels that blanket the entire country.
Loblaw also owns Shoppers Drug Mart, which also makes it the largest retail pharmacy business in Canada. That acquisition, which was completed just over a decade ago, represents a seismic shift in Loblaw’s operations.
Apart from adding a completely new retail channel (Pharmacy), the deal added some serious cross-selling capabilities, particularly with respect to its extremely popular store-branded items.
This has allowed Loblaw to tap into the market of shoppers looking to grab a few items quickly rather than stepping into a giant store. Additionally, Loblaw also boasts growing fashion and financial services businesses.
Let’s talk results
As of the time of writing, Loblaw trades within a few dollars of its 52-week high. The company has also surged a whopping 37% year-to-date and an incredible 55% over the trailing 12-month period.
That being said, those incredible gains have put downward pressure on the company’s quarterly dividend. Loblaw currently offers a 1.1% yield, which is hardly one of the best yields on the market.
Fortunately, it is growing and well-covered, making Loblaw stock a solid option to consider buying not just now, but over the next several years. Loblaw has provided healthy annual bumps to that dividend going back several years.
Turning to results, Loblaw is set to provide an update for the third fiscal in a few weeks. Until then, we can look at how the company fared during the second fiscal.
In that quarter, Loblaw reported revenue of $13.9 billion, reflecting a 1.5% increase over the prior period. Operating income for the quarter came in at $868 million, while adjusted EBITDA came in at $1.7 billion, reflecting an increase of 6.4%
Loblaw also saw e-commerce sales surge by 14.2% in the quarter.
Where will Loblaw stock be in 5 years?
Loblaw operates a highly defensive and increasingly diversified business. Specifically, the company has branched out of its core segment over the past decade with success.
Equally, Loblaw offers a well-covered and growing dividend that should be appealing to nearly every investor.
In short, prospective and current investors should continue to see Loblaw as a great long-term holding that should be a core holding in any well-diversified portfolio.
Buy it, hold it, and watch it grow.
