1 Magnificent TSX Dividend Stock Down 11% to Buy and Hold Forever

The Canadian stock market has been a mixed bag of ups and downs amidst tariff woes. While many energy and real estate stocks saw a recovery, this magnificent dividend stock fell 11% from its 52-week high after reporting a decline in its second-quarter earnings per share (EPS).

Canadian Tire’s (TSX: CTC.A) revenue surged 5.2% year over year, but diluted EPS fell 42.7% year over year to $2.04. Behind the lower EPS was a $1.03 loss on discontinued operations from the sale of Helly Hansen, as well as higher expenses related to the True North transformation. Another reason for weak profits was the pull forward in shipments to dealers at high spot rates ahead of the tariff implementation and foreign exchange pressure. While the foreign exchange pressure will remain, its impact on EPS will reduce in the following quarters.

Is the market overreacting to the earnings figure? Should you be worried?

Why did the magnificent dividend stock fall 11%?

A 10-25% dip is normal for Canadian Tire, especially during the second and third quarters. The retailer earns a majority of its revenue from automotive, home products, and seasonal outdoor segments. Automotive has the highest margin, while home products have the lowest. Hence, the product mix affects quarterly margins.

During 2021, 2022, and 2023, Canadian Tire stock saw a trend of a 15-20% dip in the second half, followed by a sharp seasonal rally between December and April. Behind this trend was a sharp surge in petroleum prices. However, the trend reversed in 2024 as consumer spending slowed and oil prices fell. Now, the US tariffs are putting further pressure on inventory costs and delaying recovery in consumer spending.

In light of the recent developments, Canadian Tire announced restructuring to make its structure leaner. The restructuring is expected to be completed by the end of the third quarter, with initial savings expected to begin in the fourth quarter.

In the short term, the retailer’s expenses will remain elevated as it implements the True North growth strategy, under which it will enhance physical stores, invest in technology, and expand loyalty programs. The initial results of the strategy were visible as the loyalty sales outpaced non-loyalty sales growth in the second quarter.

What does the 11% dip mean for long-term investors?

The 11% dip is an opportunity to buy this magnificent dividend stock and hold it for the long term. The True North strategy will take time to show results. However, the holiday season rally could drive Canadian Tire stock up 15-20% between December and February.

In the medium term, targeted loyalty rewards could help the retailer attract more discretionary dollars from its customers even amid weak consumer spending. The retailer is strengthening its owned brands by adding the recently acquired intellectual property of Hudson’s Bay Company.

An increase in owned brands could drive profit margins. Moreover, Canadian Tire is buying back shares and deleveraging its balance sheet. All this will help it grow EPS and dividends in the coming years.

Why is Canadian Tire a magnificent dividend stock?

Canadian Tire stock is currently trading below $172. It has been range-bound for the last 10 years, with the stock hovering between $130 and $180. However, the company grew its dividend at an average annual rate of 13% during this time by increasing its cash flow, buying back shares, and reducing debt.

A $10,000 investment in Canadian Tire in January 2015 would have bought you 81 shares and paid $170 in annual dividends. In percentage terms, your investment earned you a 1.7% yield ($170/$10,000). The company grew its dividend per share over the years, and that investment would have paid you $575.10 in annual dividends in 2025, a 5.8% yield on the investment.

This dividend growth makes Canadian Tire a magnificent dividend stock to buy and hold.