Canada has plenty of great retail stocks for investors. That includes both growth and income-producing stocks that can unlock long-term potential. But what is the best long-term buy given two top performers?
Let’s look at the retail space, specifically Dollarama (TSX:DOL) and Canadian Tire Corporation (TSX:CTC.A) to determine which is a better long-term buy for your portfolio.
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The case for Dollarama
Dollarama is the largest dollar-store operator in Canada. The company has a presence in every province, and despite operating over 1,600 stores domestically, the discount retailer continues to target expansion.
That expansion isn’t just within Canada.
Dollarama has a growing presence internationally. That includes a presence in several Latin American countries under the Dollar City brand. Currently, that network is just over 600 stores across Colombia, Guatemala, El Salvador, and Peru.
Dollarama plans to expand that presence by an additional 500 stores within the next five years. That expansion includes 300 stores in Mexico alone.
Part of Dollarama’s appeal stems from its low-cost, high-turnover model. That provides a steady stream of traffic irrespective of how the market is faring. Dollarama’s fixed-price model provides an element of value-add to price-conscious shoppers.
That appeal snowballs during certain periods, such as the holiday shopping period and during economic downturns, when Dollarama sees notable bumps in its business.
As a dividend stock, Dollarama offers a quarterly dividend with a yield of just 0.22%. That may sound anemic, but it’s growing, and Dollarama’s focus is growth, not income.
In terms of performance, Dollarama has surged nearly 40% year-to-date and nearly 290% in the past five-year period, making it a solid long-term buy.
The case for Canadian Tire
Canadian Tire is known as Canada’s retailer. The company has a long-established history and tradition with Canadians going back well over a century.
Today, the company has grown far beyond its namesake company to include multiple banners, including SportChek, Mark’s PartSource, and Party City.
Beyond retail, Canadian Tire has also stretched into other areas such as financial services.
The result is a well-diversified retailer offering a broad mix of products and brands that provide cross-selling and multi-channel opportunities.
That broad offering allows the retailer to hedge against downturns, while also providing some defensive appeal.
An intriguing point for prospective investors to note is Canadian Tire’s knack for integrating technology into its operations. This includes its legacy flyer going digital as well as its growing online presence and rewards system.
That rewards offering is the largest in Canada and dovetails nicely with its growing digital commerce business, which is unique among legacy brick-and-mortar retailers.
Finally, we have Canadian Tire’s dividend, which, once again, differs from the crowd.
As of the time of writing, Canadian Tire offers a tasty 4.2% yield, making it one of the, if not the best, dividends in the retail space. Adding to that appeal is the fact that Canadian Tire continues to provide annual upticks to that dividend.
The better long-term buy for your portfolio
Both Canadian Tire and Dollarama are stellar investments that would do well in any long-term diversified portfolio. As to which is the better option, it depends on the investor’s goals.
Investors looking to generate an income and exposure to the digital space will prefer Canadian Tire’s juicy yield and tech-inspired sales approach.
On the other hand, investors who are looking at all-out growth and international expansion will appreciate Dollarama’s international growth and impressive Canadian footprint.
What’s your better long-term buy?
