Have you started holiday shopping yet? When it comes to retail stocks, the holiday season is a boon for retailers – and investors looking for great growth picks.
Let’s look at a handful of great retail stocks to pad any portfolio this holiday season.
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Your source for everything (including growth)
Not all retail stocks are alike, and Dollarama (TSX: DOL) sets the standard as our first of the retail stocks to put on any investor’s radar.
Dollarama is the largest Dollar Store operator in Canada, with almost 1,700 stores across every province. Dollarama sells its merchandise at fixed-price points of $5 or less, making it ideal for value-conscious customers.
Dollarama is one of the few stocks on the market that sees robust growth not just during the good times, but also during times of volatility.
That’s because during downturns, shoppers will trade down their shopping habits to stores like Dollarama. That translates into increased earnings for Dollarama and helps explain the stellar performance of the stock.
Over the past 12 months, the stock price has shot up nearly 25%. In the past five-year period, that growth comes in at a whopping 280%.
Adding to that is Dollarama’s international growth. The company is rapidly expanding its Latin American presence through its DollarCity partnership. It also recently acquired a discount chain in Australia.
While Dollarama is a growth-focused stock, it does provide investors with a tiny quarterly dividend, which currently yields 0.23%. It’s not much, but it’s growing and adds to the appeal as one of the retail stocks to own.
The gift that keeps on giving (including a stellar dividend)
It would be impossible to mention retail stocks for the holidays and not mention Canadian Tire Corporation (TSX: CTC.A). Canadian Tire is known as Canada’s retailer.
To put it another way, Canadian Tire boasts a robust portfolio of retail sites, including over 1,700 stores across the country within a 15-minute drive for 90% of the population.
Apart from its namesake retail business, Canadian Tire also owns and operates SportsChek, Marks, and several other brands. The retailer’s retail coverage extends to everything from automotive and apparel to sports gear and outdoor sporting goods.
But what makes Canadian Tire a retail stock to add to this list? There are several compelling reasons to consider.
First, Canadian Tire has invested heavily in technology to bolster its in-store experience.
Those technology upgrades dovetail nicely with Canadian Tire’s loyalty rewards program, which is the largest in the country. The loyalty program routes users through the digital app, where targeted promotions and customer retention prevail.
Finally, Canadian Tire is unique among retail stocks in that it offers a compelling quarterly dividend with a generous yield for a retailer. As of the time of writing, Canadian Tire offers a juicy 4.2% yield.
Stock up for the holidays
When it comes to retail stocks, investors often overlook the everyday essential stocks that we interact with daily. Specifically, I’m referring to grocers like Metro (TSX: MRU).
Metro is one of the largest grocers in the country, with a solid network of over 1,000 stores across Quebec and Ontario. Only a third of those stores operate under the Metro or Metro Plus banner.
The balance of those locations comprises discount or specialty formats such as Food Basics, Super C, and Adonis. That reflects a diversified retail strategy aligned with regional demand, making Metro one of the superb retail stocks for any portfolio.
And that’s just the grocery segment. Metro also operates one of the largest pharmacy networks in Canada, with over 600 locations under multiple banners.
Adding to that appeal is another unique point – the dividend. Metro offers a quarterly dividend that, as of the time of writing, provides a respectable 1.6% yield.
Metro has also amassed an impressive history of over 20 consecutive years of annual increases. The most recent increase was a whopping 10.5% increase earlier this year.
And despite that increase, Metro maintains a sustainable payout ratio of nearly 32%.
Final thoughts on these great retail stocks
All stocks carry risk, and diversifying can offset some of that risk. Each of the three retail stocks above offers defensive appeal and growth potential.
They belong in any well-diversified portfolio, and not just for the holidays!
