Thursday, June 16, 2011

Canadian Tire Corp

I own this stock (TSX-CTC.A). I first bought this stock in 2000. I bought more in 2009 and 2010. I have made a return of 11.2% per year on this stock. The dividend portion of this return would be around 1.5% per year.

This is a retail stock, as such the dividend is low and they only increase dividends as they can afford to. The 5 and 10 year growth in dividends is 7.7% per year. The dividends were level from 2008 to 2010 inclusive. For this year, they have raised the dividends 31%. The 5 year median dividend yield is just 1.4%. This is typical of a retail stock. For this stock I expect low dividends and a decent growth in dividends.

When looking at growth figures for this stock, generally, the 10 year figures are substantially better than the 5 year figures. This is not unexpected as we are coming out of a recession. People who bought this stock 5 years ago would have broken even. However, if you had bought this stock 10 years ago the total return would be around 10 to 11% per year. The dividend portion would be around 1.6 – 1.7%. I have made the return I did because I bought stock lower than the stock peak of 2005.

Probably the worse growth is in revenues, where the growth over the past 5 and 10 years was at 3% and 5% per year, respectively. Growth was better in earnings and book value. The 5 and 10 year growth in earnings was 7% and 11% per year, respectively. Book Value growth was 7.7% and 10% per year, respectively.

When looking at debt ratios, I find that the Liquidity Ratios and the Asset/Liability Ratios to be quite good. The current Liquidity Ratio is 1.94 and the Asset/Liability Ratio is 1.56. For this stock, these ratios are often better, but the current ones are just fine. What you want is these ratios to be 1.50 and above.

The Leverage and Debt/Equity Ratios are about average. The current Leverage Ratio is 2.78 and the current Debt/Equity Ratio is 1.78. Both these ratios are often lower, but the current ones are just fine.

The Return on Equity for 2010 was 11.2% as is the 5 year median ROE. The ROE for the 12 months ending in March 2011 is 11.5%. The 5 year median ROE ending in March 2011 is 11.2%.

I am pleased with my investment in this stock and I consider this stock a core holding.

Canadian Tire Corp engages in retail sales, financial services and petroleum sales. They own Canadian Tire Store, Gas Outlets, Parts Source Stores and Mark's Work Warehouse. The Canadian Tire stores offer a unique range of automotive, sports and leisure and home products. The company is controlled by the Billes family who own most of the voting shares. Its web site is here Canadian Tire. See my spreadsheet at ctc.htm.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website for stocks followed and investment notes. Follow me on twitter.

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