Couche-Tard – Too Cheap To Ignore
In this overpriced market it’s getting harder and harder to decide where to deploy capital but a stock I have watched for awhile recently dipped 10% on acquisition news. It definitely won’t get you excited with its starting yield but its extremely low payout ratio, massive dividend growth and price appreciation should make you consider this stock.
Obviously based on the title of this post I’m talking about Alimentation Couche-Tard Inc – Atd.b on the tsx.
This is a new holding in our portfolio and I decided to put it in our kids resp. I think its great for the resp as I wont need the money for 10-15 years and offers both price appreciation and dividend growth.
Who are they?
Alimentation Couche-Tard Inc. focuses on the convenience store industry. The Company focuses on the sale of goods for immediate consumption, road transportation fuel and other products through stores and franchise operations. It operates its convenience store chain under several banners, including Circle K, Corner Store, Couche-Tard, Holiday, Ingo, Mac’s, Re.Store and Topaz.
It operates and licenses approximately 12,575 convenience stores across North America; Ireland; Scandinavia, including Norway, Sweden and Denmark; Poland; the Baltics, including Estonia, Latvia and Lithuania and Russia, of which 9,794 are company operated and generates income primarily from the sale of tobacco products and alternative tobacco products, grocery items, candy and snacks, beverages, beer, wine and fresh food offerings, including quick service restaurants, car wash services, other services and road transportation fuel.(Source Rbc – Direct Investing)
Got to love that geographical diversification!
Why did they drop 10%
On Tuesday night we heard that Couche-tard submitted a offer to Carrefour SA at a price of €20.00 per Carrefour share. (equal to about 19.66 billion)
This would be a massive acquisition and would also make couche-tard get into the grocery business. I guess shareholders weren’t a fan of the news, but on Wednesday the French government was already saying the deal wouldn’t go through.
The way I looked at it, hey if it go’s through they must see something they like. They have a great track record of acquisitions. If it doesn’t there is a easy 10% gain once the stock price go’s up to previous prices. Kind of a win win.
The stock is kind of a dividend growth investors dream. Other than the starting yield – we got in at a .96% starting yield. Its low and a lot of people will question it, I hear about cnr’s low starting yield all the time! Meanwhile that stock remains my favourite stock we hold.
Couche-Tard has an 11 year dividend growth streak and a payout ratio of only 11.11% In November they raised their dividend by 25% and they sport a solid 10 year dividend growth rate of 27.3%. 5 Year sits at 21.7%.
Considering I don’t need the money now this is a great long term stock to have.
I saw a lot of people buying couche-tard the last couple days through twitter. It offered a nice price to get in for a couple days. We purchased 35 shares at 37.22 per share. This will add $12.25 to our forward income. Not a massive amount but this is a grower.
Macs and Circle K are 2 companies I pop into once in awhile and I always love owning companies that I do business with.
Over the last couple years I keep getting reminded not to chase yields. All of my dividend cuts have been high yield companies other than disney. In 2021 I plan on focusing on quality and or higher dividend growth rates and ignoring starting yields. (to a point) Its nice to see some immediate cash flow but these dividend cuts really are not fun to see. Gotta keep growing that income and avoid all these hiccups along the way.
Well there it is, a short and sweet post. Not a massive purchase but I’m glad to get in at these prices. Sometimes the market will offer up these deals, but you got to be fast to take advantage of them.
In a world full of lock downs, I’m still surprised to see the market chugging along. Who would of thought. Time in the market always beats timing the market.
Here’s hoping we see some more dips in 2021. Did you buy anything recently? or take advantage of this recent drop?
Hey I’m Rob, creator of Passive Canadian Income.
In 2011 me and my wife had almost $60,000 in debt and a negative $7,000 Net Worth. Through hard work and financial education we paid all that off. Now we are focusing on increasing our Passive Income Streams to make the money work for us. Feel Free to Follow along the Journey by clicking the Social Media links below or subscribing to get notified of new posts on the sidebar.