North West Company operates in remote regions across Canada, Alaska, and other areas, which typically face less competition. This diversification helps to mitigate risk and provides a stable revenue stream.
What’s more, the firm’s offerings include essential consumer goods. This makes its business model resilient even in economic downturns. The firm continues to open new stores and expand into new markets.
Meanwhile the stock trades at only 13.6 times the company’s 2024 earnings forecast.
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NORTH WEST COMPANY (Symbol NWC on Toronto; www.northwest.ca) sells food, and everyday products and services through 227 stores. Those locations are mainly in northern communities across Canada and Alaska. Through your shares, you also tap the company’s operations in remote regions of Hawaii, the wider South Pacific and the Caribbean.
North West’s food offerings consist of perishable and non-perishable products including groceries, dairy, produce, meat, convenience foods, food service, home meal replacement, health and beauty aids, paper products and cleaning supplies. Its general merchandise assortment is broad, and includes family apparel, housewares, sporting goods, toys, furniture, appliances, home entertainment, snowmobiles, all-terrain vehicles (“ATVs”), boats and outboard motors. The company also offers other everyday products and services such as gasoline, pharmacy and financial services like cheque cashing, ATMs and prepaid card products.
Blue Chip Stocks: Airline ownership facilitates better service and efficiencies for North West Company
North West owns North Star Air Ltd., a Thunder Bay-based airline. North Star provides cargo and passenger services in the following regions of Canada: northwestern Ontario, northern Manitoba and Nunavut. Its operational hubs are in Pickle Lake, Red Lake, Sioux Lookout and Kapuskasing, Ontario, and Thompson, Manitoba.
North Star lets North West provide faster, more consistent delivery of merchandise to those of its stores in northern Canada that are generally inaccessible by all-weather roads. North Star’s current fleet comprises 18 aircraft, including three Basler BT-67, seven Pilatus PC-12, five ATR 72 and three Dash 8’s.
In the quarter ended April 30, 2024, overall sales rose 4.0%, to $617.5 million from $593.6 million a year earlier. Same-store sales rose 3.8% in the quarter compared to last year. Excluding one-time items, earnings in the quarter rose 12.9%, to $29.4 million, or $0.62 a share, from $26.1 million, or $0.55.
All in all, the long-term outlook for the company and its investors remains positive. That’s especially so for its operations in the North, including Alaska, where the company holds a dominant market position. Meanwhile, over the last year, the company opened six new stores, four in Canada and two in international markets.
With the October 2023 payment, North West raised its quarterly dividend by 2.6%, to $0.39 from $0.38. The shares now yield a high 3.8% for investors.
With this latest increase, North West’s annual payment to shareholders has now risen an average 4.0% in the past 5 years. The company’s TSI Dividend Sustainability Rating is Above Average.
Recommendation in Dividend Advisor: North West Company is a buy.
