When it comes to finding stocks that can deliver strong growth on a consistent basis for years, the key is to look for businesses with a proven model, a real competitive advantage, and the ability to keep expanding no matter what the economy is doing. That’s why one of, if not the best, Canadian stocks to buy on every dip and never sell is the discount retailer, Dollarama (TSX: DOL).
Dollarama is Canada’s leading dollar-store chain and one of the best-known brands in the country. It sells everyday essentials, seasonal goods, household products, and general merchandise at fixed low prices, often lower than its supermarket competitors.
With nearly 1,700 stores across Canada and growing international exposure through Dollarcity in Latin America, plus a recent expansion into Australia, it has built a retail model that works in almost any environment.
When the economy slows down, consumers trade down. And when the economy eventually rebounds, the data shows shoppers typically stick to the new shopping habits they adopted and continue looking for value. That’s exactly why Dollarama has been one of the most consistent growth stocks on the TSX for years, and why it’s one of the best to buy whenever the share price pulls back.
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A simple business model that just works
Although Dollarama’s discount retailer business model is a large reason why it’s one of the best growth stocks to buy on a dip, management’s consistent execution shouldn’t be overlooked.
So, in addition to drawing consumers in with its competitive pricing, Dollarama also consistently sources products directly, which keeps its supply chain efficient and allows it to run a tight operation. That’s why it can maintain low prices while still generating strong margins. In fact, operating margins are often between 22% and 25%, which is extremely impressive for a retailer.
The company’s growth isn’t slowing down either. Management plans to expand to around 2,200 stores in Canada by fiscal 2034, opening 60–70 stores each year.
Furthermore, some of its most significant long-term growth potential could actually come from smaller markets and underserved areas. For example, internationally, Dollarcity continues to add stores across Latin America, and the push into Australia opens up another long runway.
The high-quality Canadian stock doesn’t just grow by opening new stores, though; it also continues to increase same-store sales, which is why its growth continues to be so sustainable.
Why Dollarama continues to be one of the best growth stocks to buy on a dip
Dollarama doesn’t pay much of a dividend; the current yield is sitting around 0.2%. However, that’s exactly why it continues to be one of the best growth stocks to buy and hold for the long haul.
Instead of returning more of its earnings to investors through a larger dividend, it focuses on reinvesting that cash in growing the business, which continues to increase earnings over time.
Furthermore, not only does its revenue continue to grow rapidly year after year, but with such strong margins, its earnings often grow even faster.
So, it’s no surprise that with such rapid and consistent growth, the stock trades at a significant premium. Not only does it trade at roughly 39 times forward earnings today, but over the last five years its averaged a forward price-to-earnings ratio of roughly 30 times.
Therefore, considering that Dollarama is one of the best and most reliable growth stocks on the TSX, and the fact that it consistently trades at a premium, it’s undoubtedly one of the best stocks to buy any time its share price dips.
