The Canadian dividend giants are reliable enough to hang onto, even through the worst of times for the market. When times turn, though, these behemoths also stand to participate in the market-wide march higher.
While the mega-cap titans may already be heavily owned by the average investor, either through index funds or individual stock selection, I still think there’s a case for overweighting such an obvious name that has proven itself as a steady wealth compounder.
Though the dip might be a concern for some, I think that the longer-term narrative and fundamentals are little changed. Perhaps it’s just the price and appetite for such names that have shifted in recent months.
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Alimentation Couche-Tard
Alimentation Couche-Tard (TSX: ATD) is really testing investor patience after a market-trailing year. While shares were off to a decent start to 2025, the Iran war and spike in oil prices seem to have worked their way into the shares of the convenience retailer. Sure, higher fuel prices might be a transitory headwind (let’s say for a quarter, maybe two) for the convenience retailers, but I’d argue that the firm was built to thrive in higher oil.
If anything, more industry pressure works out in the company’s favour, given its cash hoard and ability to make a big deal in the space after the Seven & i Holdings deal fell through last year. Couche-Tard has options and, for now, it’s content buying back shares until a picture-perfect acquisition opportunity comes by its radar.
Personally, I think Couche-Tard might wish to make an acquisition in the grocery scene, even if it means paying up. At the end of the day, there’s more than just the stores and operations to pick up. I’d argue it’s the management expertise that’s invaluable as the world of convenience retail changes for the better in the decade ahead.
When gas becomes less of a draw in the future (due to more electric vehicles on the roads), groceries and necessities are going to become the new main attraction. And with a grocery supply chain in the mix, I’d argue that the fresh food initiative could go into overdrive.
Couche-Tard stock could use a deal, but will a big one happen soon?
Of course, a potential grocery deal might cause Couche-Tard to wander a bit out of its comfort zone, but I think that a Canadian or U.S. acquisition within that corner of retail might ultimately be the best way to unlock new growth pathways for the next few decades.
In any case, acquiring rival convenience retailers at compelling prices also works. But in terms of bang for the buck, I think making a vastly different kind of deal could move the needle more over the long haul.
While the 1.1% dividend yield isn’t massive, the dividend-growth potential (think double-digit annual percentage hikes) certainly is. And it is worth noting that the yield is on the high side of the past-decade historical range.
In my view, it’s a dividend-growth star to keep tabs on after the latest 8-10% drop, which has some feeling a bit confused as to how to proceed with the growth-by-acquisition wonder that’s been quiet on the merger and acquisition front lately. My bet is that once the deals start going, so, too, will the stock. And for that reason, I’m holding onto the stock, even amid the latest choppiness.
