The Canadian stock market has no shortage of high-quality blue-chip stocks that have delivered massive returns to investors over the years. However, not many can claim to have provided as stellar, consistent, and reliable growth as Dollarama (TSX: DOL) stock has in recent years.
If you take a look at the last five years alone, you will see that it has earned investors massive returns.
In the last five years, the stock has grown by around 290% at an over 30% compound annual growth rate (CAGR). Going back further, the stock has delivered an immense growth of over 700% in the last 10 years at the time of writing. If you look at its share prices when the company went public, the stock has returned over 6,000%.
The rapid growth it has delivered might be reason enough for many to invest in the stock. On top of that, its consistency and the power of compounding really make it an investment you cannot ignore.
If you’re thinking about adding Dollarama stock to your portfolio, here are a few things to consider.
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A robust and reliable business model
The first thing going for Dollarama is its ingenious business model. The $54.79 billion market-cap company is the owner of Canada’s largest chain of discounted retail stores. The company provides a wide range of everyday consumer products, general merchandise, and much more at far better prices than in general stores.
This attracts people looking for cost savings by offering them a better alternative. Even when the economy is doing well, business is booming for Dollarama because of cost-conscious consumers. This business model adds defensiveness, allowing Dollarama to generate substantial revenue regardless of economic cycles.
A record for consistency
Typically, defensive businesses tend to be boring stocks because the management tends to play it safe in terms of how they run the business. With Dollarama, the company takes advantage of the defensive business model and uses it to fuel growth. The management has grown the business through acquisitions rapidly and sustainably over the years.
The company has shown that it can consistently grow its earnings, expand through acquisitions, and provide dividends. These qualities can make it an excellent investment to consider.
Plenty of growth potential
Dollarama has become massive since becoming public, but that does not mean it is done growing. The company has quickly expanded its footprint across Canada, but has since moved to other international markets as well.
Domestically, it continues opening new locations. Internationally, it has a stake in Latin America through Dollarcity. It has also entered the Australian market recently, giving it more room for growth in a new international market.
Foolish takeaway
With all the growth it has delivered and future growth potential yet to be achieved, Dollarama stock seems too good to pass up. Even though it might not deliver the same kind of returns that early investors achieved, you can get immense long-term returns from the stock.
I would advise allocating some of the contribution room in your Tax-Free Savings Account (TFSA) to its shares for compounded and tax-free long-term wealth growth.
