With the TSX Index starting off 2025 with some choppiness, value investors may be wondering if there are some relative value options out there that can still offer a great bang for the buck. Indeed, the discretionary retail scene is pretty unloved these days, with consumers putting their wallets away to focus on various necessities. In 2025, there’s no telling which factors will influence Canadian consumers to start spending on nice-to-have things again.
With the threat of Trump tariffs and continued jokes about Canada becoming the 51st state, it’s tough to tell what’s next for Canada. Either way, I think low-cost retailers may be worth picking up right here now that expectations are a tad flat. At the end of the day, inflation has seemingly been put away, and if recent stock market gains help jolt consumer confidence (think the wealth effect), perhaps 2025 could be a year of results that are just a tad better than expected for the down-and-out retailers that trading at historically low multiples.
Canadian Tire (TSX:CTC.A) is a fantastic domestic retailer that’s been feeling the headwinds for several years now. After a solid earnings result in the back half of last year, though, there are signs that the Canadian icon is ready to march back to make new all-time highs.
Indeed, discretionary retail can be a tough place to operate, but Canadian Tire has persevered through a rather rough consumer-spending environment. While the stock could continue to be volatile (the 1.33 beta implies more market risk), I still think there are several reasons to consider picking it up at around $156 and change per share.
Reason #1: The stock is absurdly cheap
First, shares of Canadian Tire continue to be incredibly cheap, currently going for 13.52 times trailing price to earnings (P/E) or 11.71 times forward P/E. Indeed, for such a well-established retailer that’s expanded its product lineup, exclusive brand roster, and loyalty program, you’re getting a really low price of admission.
With relatively modest expectations going into its coming quarters, perhaps CTC.A stock may have what it takes to keep the newfound momentum going strong through 2025.
Reason #2: The dividend is bountiful, secure, and growthy
The dividend sits at a bountiful 4.54% at the time of writing, making Canadian Tire one of the more underrated dividend plays on the TSX Index. Additionally, this dividend is subject to steady growth, with the company rewarding shareholders with annual dividend raises through thick and thin. And with a modest payout ratio, there’s room for the dividend to keep on growing in the next three years out.
Reason #3: Impressive market positioning gives it a front-row seat to a consumer-spending rebound
Perhaps the biggest reason for owning Canadian Tire stock is its dominance in its corner of the retail scene. Whether we’re talking about Canadian Tire’s dominance in home goods or SportChek’s moat around the Canadian sports goods market, the company has a pretty wide economic moat — one that could help it keep economic profits secure once consumers are ready to splurge on goods beyond necessities once again.
All considered, CTC.A stock is a great way to play a “roaring” 2020s environment that sees Canada start spending more aggressively again.
