E-commerce helped lead the way to a 3.9% revenue and 6.4% earnings gain for this top pick during the most-recent quarter.
A $3.4 billion long-term growth plan that includes store, online business and private-label brand upgrades should help sustain this momentum and provide a basis for long-term gains.
Meanwhile the stock trades at just 9.7 times the company’s 2023 earnings forecast.
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CANADIAN TIRE CORP.(Toronto symbol CTC.A) is a top pick for 2023.
Investors benefit from the company’s 504 Canadian Tire stores. They sell automotive parts and services, and household and sporting goods; franchisees run most of the locations. The company’s other operations also enrich its outlook. They include 161 stores operating under the PartSource (auto parts) and Party City (party supplies) banners.
Canadian Tire has several other major retail chains: Mark’s sells casual and work clothing through 380 stores; and the Sport Chek Group sells sporting goods and athletic wear through 375 outlets, including Sport Chek and Sports Experts.
With the March 2023 payment, Canadian Tire will raise your quarterly dividend by 6.2%. Shareholders will then receive $1.725 a share instead of $1.625. The new annual rate of $6.90 yields a high 4.0%. With this increase, the company has now raised that payment each year for the past 13 years. It also aims to buy back between $500 million and $700 million of its shares by the end of 2023.
Value Stocks: Sales and earnings rise with an e-commerce boost
Meantime, Canadian Tire’s sales in the fourth quarter of 2022 rose 3.9% to $5.34 billion from $5.14 billion a year earlier. That beat the consensus forecast of $5.21 billion.
Overall same-store sales improved 0.3%. That’s largely due to a 4.3% improvement at Mark’s, which offset flat sales at the Canadian Tire chain and a 1.7% decline at the Sport Chek chain.
E-commerce sales totalled $450.0 million in the quarter, and accounted for 7.9% of overall retail sales. That’s well above pre-pandemic levels.
Canadian Tire’s earnings in the quarter gained 6.4%, to $546.3 million from $513.3 million a year earlier. Due to fewer shares outstanding, per-share earnings rose at a faster rate of ]10.9%, to $9.34 from $8.42. That easily beat the consensus estimate of $7.28.
The company continues to make progress with its new long-term growth plan, including upgrading its stores, online businesses and private-label brands. In all, it will spend $3.4 billion on these initiatives between 2022 and 2025.
The company expects those investments will increase its same-store sales by at least 4% annually. It also anticipates earnings rising by 38.7%, from $18.75 a share in 2022 to $26.00 a share in 2025.
The company aims to pay a dividend of between 40% and 50% of the prior year’s earnings. As a result, the higher projected earnings could increase the annual rate by nearly half, from the current $6.90 a share (for a yield of 4.0%) to at least $10.00 a share by 2026.
With this latest increase, the company’s dividend has now grown an average 13.9% annually over the last 5 years. Its TSI Dividend Sustainability Rating is Highest.
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My name is Gordon Turnbull notTurnball. If you want to send these reports please use my real name.
Our apologies, Mr. Turnbull. We’ll correct this. Thank you.