It’s been quite a turbulent June, to say the least, but just because market volatility is back does not mean it’s time to bail on the broad markets by holding cash, especially as inflation comes in a bit hotter than expected.
With inflation gaining just north of 3%, questions linger as to whether the Bank of Canada (BoC) should hike rates rather than keep the pause button held. Between a sluggish economy and rising prices on everyday goods, Canadian investors may wish to use dividend stocks to help offset a bit of that pricing pressure on our wallets.
While there is no perfect stock to buy for the month of June, I do think that a name like Canadian Tire (TSX:CTC.A) sure stands out as a relative bargain hiding in plain sight as the summer season hits and volatility looks to stay just a bit more heightened this time of year, thanks in part to the AI boom and growing concerns about the economic climate and path that rates could take next.
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Canadian Tire
Canadian Tire’s share price performance has been rather inconsistent over the years. Despite faring quite well in a challenged discretionary retail landscape, the firm has continued to feel a bit of the pinch as Canadian consumers spend money more selectively.
Undoubtedly, with May’s 3.2% CPI number coming in hot, perhaps the bellwether for the Canadian consumer could continue to be in a bit of a tough spot despite making good progress on efforts behind the scenes.
Whether we’re talking about the company’s True North transformation, smart M&A to bolster the portfolio of exclusive brands (there are already so many underneath the hood, from Hudson’s Bay Company to Sher-Wood). In any case, the main attraction to shares of CTC.A at a time like this would be the swollen (annual) dividend yield, which is currently hovering just south of the 4% mark.
Indeed, that’s quite high for the discretionary retailer, and while the name might not be headed anywhere quickly, I do think that investors might be underestimating the company’s ability to deliver value to a Canadian consumer who really needs a deal and a break amid rampant price increases and an employment situation that’s anything but sanguine.
Even as consumer-facing headwinds persist going into the second half of the year, I must say that the setup is pretty good, as too is the dividend, which is on incredibly stable footing. While the Triangle loyalty program has made Canadian consumers stick with the retailer, it’s just tough to predict when the tides will actually turn in a way to help shares of CTC.A make up for lost time.
The stock has flatlined in the past year and is actually slightly in the red over the past five years. Any way you look at it, Canadian Tire’s a fantastic business with a durable, growing dividend that’s just in a tricky environment. With shares off close to 8% from recent highs, perhaps nibbling at 16.6 times trailing price-to-earnings (P/E) could make a lot of sense this June.
