Pet Valu (TSX:PET) has lost more than half its value, underperforming the broader markets by a significant margin. The ongoing drawdown has raised the dividend yield to almost 3% in August 2026. However, is the Canadian dividend stock an undervalued gem or a value trap?
In the last shareholder call, Pet Valu management emphasized that the company continues to grow sales, generate strong cash flow, and return capital to shareholders.
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Is the TSX dividend stock a good buy?
Pet Valu is Canada’s largest pet specialty retailer. The company operates and franchises more than 800 stores across the country under banners including Pet Valu, Bosley’s, Paulmac’s Pets, Total Pet, and Tisol Pet Nutrition and Supply.
It sells more than 10,000 products, many of them exclusive or proprietary brands, and it leans heavily on trained staff to build loyalty with pet owners.
At the AGM, held on May 12, CEO Greg Ramier told shareholders the company ended fiscal 2025 with 863 corporate stores nationwide, nearly four times as many locations as its nearest pet specialty competitor. Add in the 600 stores run by its network of 370 franchise partners, and Pet Valu’s footprint is hard for smaller rivals to match.
Despite the stock’s decline, Pet Valu’s fiscal 2025 results were far from ugly. Revenue grew 7%, supported by a return to positive same-store sales.
Adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) margin held at 22%, and the company returned to adjusted earnings-per-share growth even while absorbing $0.12 per share in extra fixed costs tied to a supply chain overhaul.
Pet Valu spent close to four years and about $100 million building three distribution centres in Brampton, Ontario, Surrey, British Columbia, and Calgary, Alberta.
With the Calgary facility now running, the company is already seeing productivity gains of 60%, and management expects the completed network to support cost savings for years to come.
Free cash flow reached $104 million in 2025, a 40% conversion rate. Pet Valu used that cash to return $121 million to shareholders through dividends and buybacks, a record for the company.
Pet Valu is a recession-proof company
Part of the bull case for Pet Valu comes from how Canadians actually behave when money gets tight.
- A national study released in July by Pet Valu and Caddle found that 87% of pet-owning households consider their dog or cat a full family member.
- When budgets shrink, pet parents said they would cut dining out, clothing, coffee, and streaming services before they would cut spending on their pets.
- The same study found that 80% of pet parents expect to maintain or grow their pet spending over the next year, and 88% of Pet Valu’s sales already come through its loyalty program.
Ramier summed up the opportunity heading into 2026, the company’s 50th anniversary year, telling shareholders the company is positioned to keep growing “while strengthening our competitive moat, to drive growth over the long term.”
Management plans roughly 40 new store openings in 2026, alongside continued investment in digital tools and its private label brands.
Should you buy the dip?
Analysts tracking the Canadian dividend stock forecast revenue to grow from $1.18 billion in 2025 to $1.90 billion in 2030. The company is projected to end 2030 with a free cash flow (FCF) of $197 million, up from $104 million in 2025.
Given an annual dividend expense of about $35 million, Pet Valu’s payout ratio is sustainable. If the TSX stock is priced at 12 times forward FCF, it could more than double within the next four years.
