L:CC - Why Loblaw Companies is a Grocery Dividend Gem Investors Can't Ignore
2023-12-29 20:45:00 ET
Some of the best investments on the market are from what I like to refer to as everyday stocks. These are businesses that we interact with daily that provide a necessary service. One such example is this grocery dividend gem that investors should look at right now.
This is the grocery dividend gem to own
Loblaw Companies ( TSX:L ) is a company that most, if not all, Canadians are aware of. Loblaw operates the largest grocery network in the country under a variety of different banner names. The company also boasts the largest pharmacy store network in Canada under its popular Shoppers Drug Mart brand.
In short, the company blankets the country with 2,400 stores across its various brands and lines. Interestingly, the overlap between its pharmacy and grocery networks also allows the company to cross-sell into both channels.
In short, this means that consumers who need a few staples on the way home can opt for a smaller, quicker experience in a Shoppers store over a larger marketplace store. That cross-selling also allows Loblaw to put its wildly popular PC-branded products on more shelves.
Loblaw does more than groceries
But Loblaw isn’t only about food and groceries. In addition to its massive pharmacy network, the company also boasts a growing fashion and beauty business through its Joe Fresh brand, as well as a growing financial arm.
This makes the stock an intriguing, if not defensive pick to consider in the current environment. Higher interest rates this year have forced consumers to cut back on discretionary spending, such as eating out. By extension, it also means consumers are trading down on some essential purchases by opting for more frugal alternatives.
Turning to results, Loblaw released earnings for the third quarter back in November. During that most recent quarter, the company saw revenue surge 5%, or $877 million, to $18.3 billion. Both food retail and drug retail segments saw noted increases in same-store sales of 4.5% and 4.6%, respectively.
Loblaw also saw e-commerce sales for the quarter surge 13.6%.
Overall, the company earned $621 million, or $1.95 per diluted common share. This works out to an improvement of $65 million, or $0.26 per diluted common share, respectively.
What about income ?
Loblaw provides investors with a quarterly dividend that currently carries a yield of 1.4%. While that hardly seems like the yield of a grocery dividend gem, there’s more than a yield to consider.
Over the past five years, the stock has surged a whopping 110%, making it one of the better-paying options on the market. Throw in a growing dividend, for which the company has provided annual upticks for over a decade without fail, and you have a grocery dividend gem to buy.
In my opinion, Loblaw represents an intriguing long-term option that should form a small part of every well-diversified portfolio.
The post Why Loblaw Companies is a Grocery Dividend Gem Investors Can’t Ignore appeared first on The Motley Fool Canada .
Fool contributor Demetris Afxentiou has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy .
2023