Canadian investors looking for a reliable, long-term holding may want to take a closer look at Dollarama (TSX: DOL). Shares of the discount retailer have pulled back roughly 10% from all-time highs, and that dip could be a buying opportunity rather than a warning sign.
Dollarama has built its business on one simple idea. It aims to provide shoppers with everyday value across economic cycles, making it a recession-resistant stock.
Here’s why this Canadian dividend stock deserves a spot in a buy-and-hold portfolio.
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Is this TSX dividend stock a good buy?
Dollarama owns and operates stores across Canada that sell products at fixed, affordable prices. It is the go-to store for shoppers seeking value for everyday goods.
When people feel squeezed by inflation or rising costs, they tend to shop more carefully, which usually means more trips to value-focused retailers like Dollarama.
In the fiscal first quarter (Q1) of 2027, Dollarama’s same-store sales in Canada rose 5.6%, higher than the 4.9% growth in the year-ago period. The growth was tied to higher customer traffic and larger basket sizes per trip.
CEO Neil Rossy pointed to broader economic uncertainty as a reason shoppers continue to choose Dollarama.
Inflation and rising costs, including fuel prices, continue to weigh on household budgets. Rossy said the company’s direct sourcing and flexible pricing approach helps it manage these pressures while still delivering value to customers.
- Dollarama reported revenue of $1.9 billion in fiscal Q1, an increase of 21.4% year over year.
- It reported an EBITDA (earnings before interest, tax, depreciation, and amortization) of $583 million, up 17.4% year over year, and indicating a margin of 31.6%.
- Net income rose 13% to $302 million or $1.11 per share.
- Gross margin in Canada improved to 45% of sales, up from 44.2% the year before.
CFO Patrick Bui explained that lower logistics costs and the benefits of a bigger, more efficient business helped drive margin improvement.
The company is keeping its full-year gross margin guidance unchanged at 45% to 45.5%, even as it expects some cost pressure later in the year due to global supply chain and fuel price pressures.
Dollarama also opened 28 net new stores in Canada during the quarter, bringing its total to 1,719 locations. Management expects to open between 60 and 70 net new stores across the country this fiscal year.
Currently, Dollarama stock pays shareholders $0.48 in annual dividends, which translates to a yield of just 0.3%. However, these payouts have risen from $0.06 per share in 2012.
What’s next for the Canadian dividend stock
Dollarama’s investment in Dollarcity, a similar value retailer across Central and South America, is a key long-term driver. The company’s share of Dollarcity’s net earnings grew 27.1% to $51.2 million in the quarter, reflecting a 37.7% increase in net earnings from that region.
Dollarama is also working on a longer-term project in Australia, where it is gradually converting stores acquired through The Reject Shop into Dollarama-style locations.
Management expects this transition to weigh on Australian sales in the near term, but they describe it as an important step toward future growth in that market.
Rossy noted that early signs from renovated stores and new imported products have been encouraging, though he cautioned it is still too early to draw firm conclusions.
Dollarama continues to return cash to shareholders. The company bought back nearly two million shares for $339.1 million during the quarter and announced a quarterly dividend of $0.12 per share. That combination of consistent buybacks and a growing dividend is a strong signal of financial discipline.
For investors who want a business that performs well in good times and tough times alike, Dollarama’s track record speaks for itself. The recent 10% pullback in the stock price does not appear to reflect any change in the underlying business.
The Foolish takeaway
Dollarama combines steady sales growth, expanding profit margins, and international growth potential with a shareholder-friendly dividend and buyback program.
For long-term investors, a 10% dip looks less like a red flag and more like a chance to buy a proven Canadian retailer at a lower valuation.
