Although a handful of high-quality Canadian stocks have earned investors massive returns over the years, no other stock has done it as rapidly, as consistently, and for as long as Dollarama (TSX: DOL).
In fact, over the last five years alone, Dollarama has earned investors a total return of 291%, or compound annual growth rate (CAGR) of 31.4%. And that’s just the start. Go back 10 years, and the stock is up 692%, a CAGR of 23%. Stretch it back to its IPO in 2009, just over 16 years ago, and Dollarama has delivered a total return of 6,611%, or roughly 29.6% annually.
Yes, the rapid growth matters. But it’s the consistency that really powers the compounding. And even though Dollarama has been one of the most reliable performers on the TSX for years, investors still hesitate every time the stock pulls back or trades near all-time highs.
It’s understandable to worry about valuation or question how much growth potential is left now that Dollarama is a roughly $55 billion company.
However, when you look at the business itself, Dollarama continues to stand out as one of the highest-quality stocks you can buy in Canada. It has a defensive business model, a long-term track record of top-notch execution, and growth opportunities that go well beyond the 60 to 70 new locations it opens across Canada each year.
So, if you’re thinking about adding Dollarama stock to your portfolio, here are three reasons why it continues to be one of the top picks on the TSX.
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Dollarama stock has an incredibly reliable, defensive business model
One of the biggest reasons to own Dollarama is due to how reliable its business model is. No matter what’s happening in the economy, Canadians keep shopping at Dollarama. When times are good, people go for convenience and value. Meanwhile, when times are tough, even more shoppers head to Dollarama as they attempt to stretch their budgets.
Since it sells everyday essentials, household items, and basic consumables that people continue to buy, it is relatively insulated from economic cycles. Unlike discretionary retailers, Dollarama’s products are low-cost, essential, and frequently replenished.
That’s why Dollarama is one of the best stocks to buy and hold for the long haul. It’s both highly defensive and a top-notch growth stock, offering investors the best of both worlds.
A long track record of consistent execution
Another reason Dollarama stock is one of the very best Canadian stocks to buy and hold for the long haul is its proven track record.
While Dollarama’s business model makes it a defensive growth stock, it’s the management team that has done an incredible job over the years of expanding the business rapidly and sustainably.
So, now, with Dollarama having demonstrated it can consistently grow earnings, expand margins, and reward shareholders through a mix of dividends and share buybacks, it’s easily one of the best investments on the TSX.
Dollarama stock still has a ton of growth potential ahead
Although Dollarama is now worth more than $55 billion and has rapidly expanded its footprint across Canada, it still has plenty of growth potential ahead.
Domestically, the company continues to open new stores every year while also driving higher sales per location through pricing adjustments and an expanding product mix.
However, a significant portion of Dollarama’s long-term growth will also come from its international exposure through Dollarcity, which operates discount stores across several Latin American countries and continues to expand aggressively.
In addition, Dollarama has also entered the Australian market, giving it another long runway for growth outside of Canada.
So, with that in mind, this doesn’t mean you have to rush out and buy Dollarama today while it’s trading less than 5% off its 52-week high. But it does mean you should never expect a massive discount on the high-quality Canadian stock.
And when it eventually does pull back even a modest 10%, that’s the opportunity to buy that you won’t want to ignore.
