Written by Kay Ng at The Motley Fool Canada

Alimentation Couche-Tard (TSX:ATD) is not at the top of the list for income investors. With a modest yield of 0.9% as of writing — far below the 4% offered by the best one-year Guaranteed Investment Certificates (GICs) — income-focused investors would look elsewhere. However, a closer examination reveals that the stock’s potential for long-term growth may make it intriguing for total-return investors.

Dividend growth

While Alimentation Couche-Tard’s dividend yield is small, it has a solid track record of consistent dividend increases. The company has raised its dividend for 14 consecutive years, with impressive growth rates of around 25-26% over the last three, five, and 10 years.

ATD Dividend Yield data by YCharts

Over the past decade, its average yield has been closer to 0.6%, and with the current yield sitting near a 10-year high, this maybe a good entry point for those looking for a proven dividend-growth stock. Couche-Tard’s resilient business model, strong earnings, cash flows, and low payout ratio further support the idea that its dividend-growth streak could continue for years to come.

Resilient earnings and cash flow

Alimentation Couche-Tard’s business model has demonstrated remarkable resilience throughout economic cycles. Over the last 15 years, the company’s diluted earnings per share (EPS) have only dipped in two years, and in both cases, the declines were minor — around 1% and 6%. This consistent performance is a testament to Couche-Tard’s ability to navigate the economic cycle, making it an attractive option for long-term investors seeking stability.

The company’s diversification across fuel retailing and convenience stores, combined with its focus on maintaining a lean cost structure, has allowed it to continue generating steady profits and cash flow, even in challenging market conditions.

Growth

Alimentation Couche-Tard’s growth story has been driven by a strategic acquisition strategy. Since opening its first convenience store in Quebec in 1980, the company has expanded step by step, moving into the United States in 2001 and Europe in 2012. One of the most notable milestones in recent years was the 2020 acquisition of the Circle K franchise, which significantly boosted its presence in Asia.

The company’s recent attempt to acquire Seven & I Holdings, the parent company of 7-Eleven, raised some concerns among analysts. At US$47 billion, the deal would be Couche-Tard’s largest acquisition to date, prompting questions about whether the company could successfully integrate such a large operation. However, some analysts believe that Couche-Tard’s management team could unlock synergies from the acquisition, improving operational efficiency and boosting profitability.