Have you started holiday shopping yet? When it comes to retail stocks, the holidays are a boon for retailers – and for investors looking for good growth opportunities.
Let’s take a look at a handful of great retail stocks that can complement any portfolio this holiday season.
Your source for everything (including growth)
Not all retail stocks are the same, and Dollarama (TSX:DOL) sets the standard as our first of the retail stocks to put on every investor’s radar.
Dollarama is the largest Dollar Store operator in Canada, with nearly 1,700 stores in every province. Dollarama sells its merchandise at flat prices of $5 or less, making it ideal for value-conscious customers.
Dollarama is one of the few stocks in the market that has seen robust growth, not only in good times, but also in times of volatility.
That’s because during recessions, shoppers will trade their shopping habits for stores like Dollarama. That translates into higher profits for Dollarama and helps explain the stock’s stellar performance.
Over the past twelve months, the share price has risen by almost 25%. Over the past five years, that growth has reached a whopping 280%.
Added to this is Dollarama’s international growth. The company is rapidly expanding its presence in Latin America through its DollarCity partnership. It also recently acquired a discount chain in Australia.
While Dollarama is a growth-oriented stock, it does offer investors a small quarterly dividend, currently yielding 0.23%. It’s not much, but it’s growing and adding to its appeal as one of the retail stocks to own.
The gift that keeps on giving (including a great dividend)
It would be impossible to mention retail stock for the holidays and not say anything about it Canadian Tire Corporation (TSX:CTC.A). Canadian Tire is known as the Canadian retailer.
In other words, Canadian Tire has a robust portfolio of stores, including more than 1,700 stores across the country within a 15-minute drive for 90% of the population.
In addition to its namesake retail business, Canadian Tire also owns and operates SportsChek, Marks and several other brands. The retailer’s retail coverage extends to everything from cars and clothing to sporting goods and outdoor equipment.
But what makes Canadian Tire a retail stock to add to this list? There are several compelling reasons to consider.
First, Canadian Tire has invested heavily in technology to enhance the shopping experience.
These technology upgrades align nicely with Canadian Tire’s loyalty program, which is the largest in the country. The loyalty program guides users through the digital app, where targeted promotions and customer retention prevail.
Finally, Canadian Tire is unique among retail stocks in that it offers an attractive quarterly dividend with a generous return for a retailer. At the time of writing, Canadian Tire is offering a juicy 4.2% yield.
Stock up for the holidays
When it comes to retail stocks, investors often overlook the everyday essential stocks we interact with every day. I’m specifically referring to grocers such as Subway (TSX:MRU).
Metro is one of the country’s largest grocers, with a robust network of more than 1,000 stores in Quebec and Ontario. Only a third of these stores operate under the Metro or Metro Plus banner.
The balance of these locations consists of discount or specialty formulas such as Food Basics, Super C and Adonis. That reflects a diversified retail strategy tailored to regional demand, making Metro one of the excellent retail stocks for any portfolio.
And that’s just the supermarket segment. Metro also operates one of the largest pharmacy networks in Canada, with more than 600 locations under multiple banners.
Adding to this appeal is another unique point: the dividend. Metro offers a quarterly dividend that, at the time of writing, yields a respectable 1.6%.
Metro has also built an impressive history of more than twenty consecutive years of annual increases. The most recent increase was as much as 10.5% earlier this year.
And despite that increase, Metro maintains a sustainable payout ratio of almost 32%.
Final thoughts on these great retail stocks
All stocks involve risk, and diversification can offset some of that risk. Each of the three retail stocks above offers defensive appeal and growth potential.
They belong in every well-diversified portfolio, and not just for the holidays!
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