Pet Valu Holdings (TSX: PET) has been cut in half from its highs, and that’s why it deserves a closer look right now.
The company’s fundamentals are strong, and it recently announced a dividend hike. Moreover, it is still printing free cash flow while most Canadian retailers are struggling just to hold the line.
If you’ve been looking for a beaten-down TSX dividend stock with real staying power, Pet Valu is one of the most compelling setups on the board today.
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The investment thesis for the TSX stock
Pet Valu is Canada’s dominant specialty pet retailer. Founded in 1976 and headquartered in Markham, Ontario, it sells pet food, treats, health products, toys, and accessories for dogs, cats, fish, birds, reptiles, and small animals. With 863 stores from coast to coast, Pet Valu has nearly four times as many locations as its nearest pet specialty competitor in Canada.
The company operates a mix of corporate-owned and franchise stores, sells online, and offers in-store services such as self-serve dog washes. Its proprietary brands, including Performatrin Ultra, Performatrin Prime, and Performatrin Naturals, now make up about 25% of total sales.
Those brands carry roughly a 1,200-basis-point margin advantage over national brands, meaning lower prices for customers and better profitability for Pet Valu. That’s a hard combination to beat.
For the full year 2025, Pet Valu grew revenue over 5% on a 52-week comparable basis, maintained adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) margins of 22%, and generated over $104 million in free cash flow. In Q4, the company delivered $326 million in revenue, up 11% year-over-year, and $75 million in adjusted EBITDA, indicating a 23% margin.
Yes, same-store sales growth came in at a modest 0.3% in Q4. Pet Valu attributed its tepid growth to a value-focused pricing strategy, increased promotional intensity across the industry, and a soft Canadian consumer backdrop.
However, units per transaction hit a multi-year high, and loyalty program penetration reached an all-time high of 88%. Online sales also continued to outpace the overall channel.
These are the signals of a healthy, sticky customer base, not of a business in trouble.
A dividend hike
Pet Valu’s board approved an 8% increase in its quarterly dividend to $0.13 per share, indicating a yield of 2.4%. The pet retailer has raised dividends for five consecutive years.
- Analysts forecast Pet Valu to increase free cash flow from $118 million in 2026 to almost $200 million in 2030.
- With an annual dividend expense of roughly $35 million, Pet Valu has enough room to increase its dividends in line with FCF.
- Pet Valu returned a record $121 million to shareholders in 2025 through a combination of dividends and share buybacks. That’s nearly double the $62 million returned in 2024.
And with capital expenditure dropping significantly now that its multi-year supply chain transformation is complete, management expects free cash flow conversion to stay at or above 40% in 2026.
The Foolish takeaway
Pet Valu isn’t immune to macro pressure. Canada’s consumer spending environment is tight, and the pet specialty category remains competitive. Management guided for flat-to-2 % same-store sales growth in 2026, which is steady rather than spectacular.
But the TSX stock is priced for pessimism, not for a company that has grown its store count, raised its dividend for five consecutive years, and returned record capital to shareholders even in a difficult year.
At current prices, you’re getting a proven Canadian franchise, a growing proprietary brand engine, and an increasingly lean capital structure: all at a discount.
