The strong rally in the broader Canadian equity market over the past year has pushed many stocks close to record levels. The Canadian benchmark index has climbed more than 42% during this period, despite ongoing trade disruptions and rising geopolitical tensions. Much of the advance has been driven by sustained strength in the basic materials and energy sectors, which have benefited from firm commodity prices and improving global demand.
Even in a rising market, however, some high-quality TSX stocks have recently pulled back from their highs. These short-term declines create opportunities for long-term investors to buy fundamentally strong businesses at a discounted price.
Against this background, here is a Canadian stock that is 16% off its highs and built to hold forever. Notably, this company has consistently delivered solid financial results and has significant long-term growth prospects, suggesting its share price could recover swiftly and deliver meaningful upside in the years ahead.
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A Canadian stock built to hold forever
Investors looking for a high-quality Canadian stock built to hold forever could consider Dollarama (TSX: DOL). Shares of the Canadian value retailer have grown at a compound annual rate of about 26% over the last five years, significantly outpacing the Canadian benchmark index.
Recently, Dollarama stock took a hit, declining about 16% from its highs, after the company reported weaker-than-expected comparable-store sales in the fourth quarter due to adverse weather conditions. Moreover, the expected pressure on profit margins due to rising operating costs and the integration of its newer Australian operations further weighed on Dollarama stock.
Investor sentiment has also been influenced by broader economic uncertainty. Slower consumer spending, geopolitical risks, and persistent inflation can all weigh on retail performance. These factors have raised questions about the company’s near-term growth outlook.
Despite these concerns, Dollarama’s core business model remains resilient. The company focuses on selling everyday essentials, seasonal items, and general merchandise at fixed low price points. This strategy appeals to cost-conscious shoppers, particularly during periods of economic pressure. When household budgets tighten, discount retailers like Dollarama are likely to benefit as consumers look for lower-priced alternatives, helping sustain traffic and sales.
While Dollarama stock is set to rebound, the company will also likely reward shareholders with higher dividend payments. Dollarama has increased its dividend every year since 2011, reflecting its strong cash generation and disciplined capital allocation. While the yield remains modest, consistent growth signals management’s confidence in the business’s long-term stability.
Overall, the pullback in Dollarama’s stock provides an opportunity to accumulate shares.
Why Dollarama could deliver solid long-term gains?
Dollarama is a dependable long-term investment, offering stability, growth, and income. It is likely to benefit from steady store expansion and its focus on low prices. Notably, a major driver of the company’s outlook is its disciplined store expansion. Dollarama plans to add roughly 60–70 stores each year, aiming to reach a network of about 2,200 stores by 2034. Notably, its new locations generate quick payback periods and require relatively low ongoing maintenance, allowing the company to scale efficiently while supporting consistent revenue growth.
Dollarama is also adapting to changing consumer behaviour. By expanding its presence on third-party delivery platforms, the retailer is making its products easier to access, which should contribute incremental sales without heavy infrastructure investments.
While its margins could remain under pressure, its product strategy could continue to cushion margins. A mix of well-known brands and private-label products attracts a wide range of shoppers while giving Dollarama flexibility in pricing and sourcing. Direct procurement from suppliers enhances its bargaining power and helps keep costs under control.
International growth is another promising catalyst. Dollarama recently acquired Australian discount retailer The Reject Shop Limited, broadening its geographic footprint beyond Canada. Management plans to transform the Australian business by applying Dollarama’s proven low-price, high-volume retail model, with store upgrades and product imports planned through fiscal 2027.
Overall, while Dollarama faces short-term concerns, its fundamentals remain solid, and the value retailer is well-positioned to outperform the broader market.
