Picking a stock is the second most difficult part of investing. The most difficult part is not selling it on time, hoping that it will rise more. There are many approaches to picking a stock. One is a top-down approach where you study the economy, shortlist the industry, the type of stock – large cap or small cap – and buy the top ones. You can combine it with the bottom-up approach, wherein you study the financials, risk, and returns of each shortlisted stock. Once you know the fundamentals, strengths, and weaknesses, buy the stock based on your investment needs – wealth generation or passive income – and risk appetite.
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Is Canadian Tire a smart stock to buy?
Shortlisting a stock is one thing, but when and how to invest is another. Canadian Tire (TSX:CTC.A) is one of Canada’s biggest retail stores offering a wide range of products from automotive parts to seasonal and gardening, fixing, living, and sports. Apart from this, it also sells petroleum.
In the first quarter of 2025, Canadian Tire invested in the True North strategy to boost its earnings. The strategy includes investment in technology, loyalty points, digital and store experiences, and a personalized data-driven customer experience. These efforts helped increase its comparable retail sales by 3.2% in the third quarter. However, its diluted earnings per share (EPS) fell 11.8% as True North’s implementation increased its cost. Once the strategy is implemented, its EPS will improve as the strategic cost reduces.
To answer the question, Canadian Tire is a stock you could consider buying as it is a quality stock.
What to expect from Canadian Tire?
From a fundamentals perspective, Canadian Tire continues to do business as usual. Its stock is range-bound, given the slow and steady growth and lower profit margin of retail. However, it is a good dividend stock to own if you are looking for reliable and stable dividends.
If you already own Canadian Tire stock, the dividend growth and dividend reinvestment plan can keep compounding your passive income. The smart decision is to stay invested and let the compounding continue.
Is Canadian Tire a smart stock to buy now?
However, if you are looking to buy the stock now, Canadian Tire’s dividend growth rate has slowed from a strong double-digit to 1.4% in the last three years. A 4.4% dividend yield could be an attractive option, but there are better dividend stocks that offer a higher yield.
Moreover, there is not much scope for capital gain. Loblaw is a better option as inflation and tariffs have slowed discretionary spending. The grocer’s stock has surged 290% in the last five years, while Canadian Tire hovered between a 30% dip and rally cycles.
A smart way to invest in Canadian Tire is to buy the dip, calculate a 25–28% upside, and sell at that price. The stock dipped to $159.70 in August. Taking a 28% upside, the stock could go up to $204. So if you buy at the current price of $168, you can consider selling it at a 20% upside.
If dividends is your investment objective, SmartCentres REIT is a better range-bound retail REIT that offers a 7% yield. Although it doesn’t grow dividends annually, the high yield makes up for it.
