Canadian Tire Corp

I own this stock (TSX-CTC.A). I originally bought this stock in 2000. I also bought more in 2009 and 2010. I have made a total return of 10.33% per year with 1.74% of the total return per year attributable to dividends. I have, of course done better on the stock bought in 2000 that the stock bought later. For the stock bought in 2009 and 2010, I have made a total return of 4.33% per year with 1.6% per year attributable to dividends.

This is a consumer stock and it has not done well since the latest bear market of 2008. This is typical of consumer stocks. However, I expect this stock to do well over the long term. If you had invested in this stock over the last 5 and 10 years, your total return would probably be 0% and 11.7%. The dividends paid would have added 1.3% and 1.7% per year to your return. (The implications for 5 year investment would be that you would get dividends, but would have lost around 1.5% in capital gains.)

What is also typical of consumer stock is the low dividend yield, good dividend increases and low Dividend Payout Ratios. The 5 year dividend yield is 1.53%. The 5 and 10 year growth in dividends is at 10.8% and 10.7% per year, respectively. The 5 year median Dividend Payout Ratios for earnings is 18.3% and for Cash Flow is 16.4%. For the stock I bought in 2000, I am getting a dividend yield of 5.4% on my original investment.

This stock is not on any dividend lists I follow. Since 2004, they have had a good record of increasing their dividends. Before 2004, dividends were flat. They also did not raise their dividends in 2009 and 2010. The 10 year median Dividend Payout Ratios are lower than the 5 year ones and this is because of the years 2007 to 2009. The 10 year median DPRs are 15% and 8.8%. The DPR for 2011 is 19% for earnings and 6.4% for cash flow. The dividend increase for 2011 was quite high at 31%. The most recent dividend increase was more normal at 9.1%.

For this stock, the worse growth is in revenues, and the 5 and 10 year growth in revenue per share is 3.9% and 6.4% per year, respectively. Growth in earnings is not bad with 5 and 10 year growth at 5.8% and 9.9% per year, respectively. Growth in Book Value is good with 5 and 10 year growth at 9.6% and 8.4%. The best is growth in cash flow, with 5 and 10 year growth at 11.2% and 12.2% per year, respectively.

When I look at return on equity, I find that ROE for the end of 2011 to be 10.6% and the 5 year median ROE to be 10.6% also. The ROE based on comprehensive income is similar with the one for the end of 2011 at 10.6% and the 5 year median ROE at 11.3%.

This company has voting and non-voting shares, so that it is really controlled by one person, Martha Gardner Billes. Often such companies have good debt ratios and this company is no different. The Liquidity Ratios have always been good and the current one is 1.68. The Asset/Liability Ratio is a bit lower, but still good at 1.56. The Leverage and Debt/Equity Ratios are also good, with current ratios at 2.80 and 1.80.

The Liquidity Ratio and Asset/Liability Ratio are lower than the 5 year median ratios of 1.99 and 1.85. (With these ratios, higher is better, but good ones are 1.50 and above.) The Leverage and Debt/Equity Ratios are higher than the 5 year median ratios of 2.17 and 1.17. (With these ratios, lower is better.) With the new accounting rules, both the Assets and Liabilities have increased, but debt ratios are not as good. Problem is that we do not know what the long term effect of the new accounting rules will be.

I am pleased with the performance of this stock. It is acting as I expected. I had bought this stock for diversification purposes.

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.