Should Canadian Tire Corporation Limited (TSE:CTC.A) Be Part Of Your Dividend Portfolio?

Canadian Tire Corporation Limited (TSX:CTC.A) has pleased shareholders over the past 10 years, paying out an average dividend of 2.00% annually. The company is currently worth CA$11.22B, and now yields roughly 2.17%. Does Canadian Tire tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis. Check out our latest analysis for Canadian Tire

5 checks you should use to assess a dividend stock

If you are a dividend investor, you should always assess these five key metrics:

• Is its annual yield among the top 25% of dividend payers?

• Does it consistently pay out dividends without missing a payment or significantly cutting payout?

• Has dividend per share amount increased over the past?

• Is its earnings sufficient to payout dividend at the current rate?

• Will the company be able to keep paying dividend based on the future earnings growth?

TSX:CTC.A Historical Dividend Yield May 24th 18

How does Canadian Tire fare?

The current trailing twelve-month payout ratio for the stock is 28.90%, meaning the dividend is sufficiently covered by earnings. Going forward, analysts expect CTC.A’s payout to remain around the same level at 30.49% of its earnings, which leads to a dividend yield of around 2.33%. In addition to this, EPS should increase to CA$12.16. Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. In the case of CTC.A it has increased its DPS from CA$0.84 to CA$3.6 in the past 10 years. During this period it has not missed a payment, as one would expect for a company increasing its dividend. These are all positive signs of a great, reliable dividend stock. Relative to peers, Canadian Tire generates a yield of 2.17%, which is on the low-side for Multiline Retail stocks.

Next Steps:

Taking into account the dividend metrics, Canadian Tire ticks most of the boxes as a strong dividend investment, putting it in my list of top dividend payers. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. I’ve put together three relevant factors you should further research:

1. Future Outlook: What are well-informed industry analysts predicting for CTC.A’s future growth? Take a look at our free research report of analyst consensus for CTC.A’s outlook.

2. Valuation: What is CTC.A worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether CTC.A is currently mispriced by the market.

3. Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.

To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned.