Valued at a market cap of $8.5 billion, Canadian Tire (TSX:CTC.A) stock has trailed the broader markets in the past decade. Since May 2015, the TSX stock has returned just 17% to shareholders. If we adjust for dividend reinvestments, cumulative returns are closer to 59%.

Today, Canadian Tire stock trades 30% below its all-time highs and offers a tasty dividend yield of 4.7%. Let’s see if this TSX dividend stock should be on your watchlist right now.

Should you own this TSX dividend stock right now?

In 2024, Canadian Tire reported adjusted earnings of $12.62 per share, an increase of almost 13% year over year. Despite a challenging retail environment, CTC demonstrated an ability to control costs while promoting key categories.

The retailer reported modest growth in the fourth quarter (Q4), with retail and comparable sales excluding petroleum up more than 1% across banners. Revenue increased 1.3% to $4.1 billion after seven consecutive quarters of decline, driven by higher Canadian Tire retail shipments and growth at Helly Hansen and Mark’s.

Triangle Rewards continues to be a key growth driver, with loyalty members shopping more frequently and spending more than in 2023. Loyalty penetration reached 54% of sales in 2024, up 141 basis points from the previous year. After a strategic review, the company also finalized its decision to retain full ownership of Canadian Tire Financial Services.

Cost control remains impressive, with normalized retail operating expenses down $15 million in Q4. Supply chain modernization efforts in Calgary and Montreal delivered $20 million in savings during 2024. Corporate inventory dollars finished 5% below last year as Canadian Tire maintains disciplined inventory management while focusing on product assortment vitality.

Looking ahead, Canadian Tire faces uncertainty around potential U.S. tariffs, though management expressed cautious optimism about consumer trends. It is well-positioned with forward currency hedging for over 80% of its 2025 U.S. dollar requirements at rates below current spot prices, providing some margin cushion.

Is this TSX stock undervalued?

Analysts tracking Canadian Tire expect its sales to increase from $16.36 million in 2024 to $17 million in 2029, indicating a compounded annual growth rate of less than 1%. Comparatively, adjusted earnings per share are forecast to grow by 4% annually from $12.6 in 2024 to $15.4 in 2029.

Today, the TSX stock trades at a forward price-to-earnings multiple of 12 times, higher than its five-year average multiple of 11 times. If Canadian Tire stock is still priced at 11 times forward earnings, it will trade around $163 per share in early 2028, indicating an upside potential of 8% from current levels. Given consensus price targets, CTC stock trades at a 6% discount in May 2025.

A key near-term driver for CTC stock will be its Q1 earnings report. Bay Street expects it to report revenue of $3.55 billion in the March quarter with an adjusted earnings per share of $1.28. While revenue is forecast to grow by 0.9%, earnings might decline by 7% year over year.

I think Canadian Tire stock is unlikely to deliver outsized gains to shareholders over the next three years. However, it remains attractive to income-seeking investors as the stock offers a forward yield of almost 5%.

The post Where Will Canadian Tire Stock Be in 3 Years? appeared first on The Motley Fool Canada.

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Fool contributor Aditya Raghunath has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.