Couche-Tard – Too cheap to ignore
It’s getting harder and harder to decide where to put capital in this overpriced market, but a stock I’ve been watching for a while recently fell 10% on acquisition news. It definitely won’t amaze you with its starting yield, but its extremely low payout ratio, massive dividend growth, and price hike should make you consider this stock.
Based on the title of this post, I’m obviously talking about Alimentation Couche-Tard Inc – Atd.b at tsx.
This is a new position in our portfolio and I have decided to add it to our children or I think it’s great for that person as I don’t need the money for 10-15 years and it offers both price increases and dividend growth.
Who are you?
Alimentation Couche-Tard Inc. focuses on the convenience store industry. The company focuses on the sale of goods for immediate consumption, fuel for road transport, and other products through stores and franchises. The company operates its convenience store chain under various banners, including Circle K, Corner Store, Couche-Tard, Holiday, Ingo, Macs, Re.Store and Topaz.
The company operates and licenses approximately 12,575 convenience stores across North America. Ireland; Scandinavia, including Norway, Sweden and Denmark; Poland; The Baltic States, including Estonia, Latvia, Lithuania and Russia, of which 9,794 are business-operated and generate income mainly from sales of tobacco products and alternative tobacco products, groceries, sweets and snacks, beverages, beer, wine and fresh food. including quick service restaurants, car washes, other services and fuel for road transportation. (Source Rbc – Direct Investing)
I have to love this geographical diversification!
Why are they down 10%?
On Tuesday evening we heard that Couche-tard had made Carrefour SA an offer at a price of € 20.00 per Carrefour share. (equals approximately 19.66 billion)
This would be a massive acquisition, and it would also push Couche-Tard into the grocery business. I think shareholders weren’t a fan of the news, but on Wednesday the French government already said the deal wasn’t going to go through.
The way I saw it, hey, if it goes through, you have to see something you like. You have a great track record of acquisitions. If this is not the case, there is a slight gain of 10% once the stock price rises to previous prices. Kind of a win-win.
The stock is the kind of dividend growth that investors dream of. Apart from the initial yield, we achieved an initial yield of 0.96%. It’s low and a lot of people are going to question it. I hear the low starting yield of cnr all the time! In the meantime, this stock remains my favorite one that we hold.
Couche-Tard has an 11-year dividend growth streak and a payout ratio of just 11.11%. In November, they increased their dividend by 25% and have a solid 10-year dividend growth rate of 27.3%. 5 years is 21.7%.
Considering I don’t need the money right now, this is a great long-term stock.
I’ve seen a lot of people buy Couche-Tard on Twitter in the past few days. It was a good price for a couple of days. We bought 35 shares at 37.22 per share. This increases our forward earnings by $ 12.25. Not a large amount but this is a breeder.
Macs and Circle K are two companies I dive into every now and then and I always love owning companies that I do business with.
Over the past few years I’ve been reminded again and again not to chase returns. All of my dividend cuts were high yield companies other than Disney. In 2021, I plan to focus on quality and higher dividend growth rates and ignore initial returns. (up to a point) It’s nice to see instant cash flow, but these dividend cuts really aren’t fun. I need to keep growing this income and avoid all of these hiccups along the way.
Now there it is, a short and sweet post. Not a massive buy, but happy to jump in at these prices. Sometimes the market has these offers, but you have to be quick to take advantage of them.
In a world of lockdowns, I’m still surprised to see the market chug. Who would have thought that. Time in the market is always better than the timing of the market.
We hope to see more break-ins in 2021. Have you recently bought something? or take advantage of this recent decline?
Hey, I’m Rob, the creator of Passive Canadian Income.
In 2011, my wife and I had nearly $ 60,000 in debt and $ 7,000 in negative net worth. We paid for it all through hard work and financial education. Now we are focusing on increasing our passive income streams to make the money work for us. Follow the journey by clicking the social media links below or signing up to be notified of new posts in the sidebar.