Canadian investors might start having a hard time finding deals. It was fairly easy if you were a long-term investor looking for a great deal in the last while. As long as you were patient, you knew that a strong dividend stock would rise back once interest rates came down. But now, interest rates are coming down. And deals aren’t so easy to find.
But those deals do exist, including for a top dividend stock like North West Company (TSX:NWC). NWC stock has seen its shares rise higher and higher over the last year, but still offers a deal thanks to its dividend and valuations. So let’s look at why investors might still want to consider this dividend stock, especially for top passive income.
Consistent earnings
The Canadian grocery and retail store operator has demonstrated consistent performance in its recent earnings reports, indicating potential for both growth and dividends. The company’s latest earnings report for the fourth quarter of 2023 showed a 6.7% increase in consolidated net earnings to $134.3 million compared to the previous year. Diluted earnings per share rose to $2.67 from $2.51, driven by higher earnings despite increased interest and income tax expenses.
Furthermore, NWC stock has shown resilience, rising after each earnings report over the past year. Despite a slight year-to-date decrease of 4.5%, the stock’s performance reflects strong fundamentals. Analysts currently have price targets ranging from $38 to $45, suggesting a possible upside of around 7% from its current price of approximately $42.
Valuable
Another bonus for NWC stock? Its financial health. The company’s financial health is underscored by its strong return on equity (19.8%) and a healthy debt-to-equity ratio (57.5). These metrics indicate efficient use of equity and manageable debt levels, which are favourable for both growth and dividend stability.
Furthermore, North West has a dividend yield of about 3.8% as of writing, with a payout ratio of 56.8%, reflecting a sustainable dividend policy backed by solid earnings. Looking ahead, North West’s strategic focus includes expanding its presence in remote communities and enhancing supply chain efficiencies, which should support continued revenue growth.
Finally, the company’s price-to-earnings (P/E) ratio stands at approximately 15.2, indicating a reasonable valuation compared to the broader market and peers in the retail sector. So, with all that in mind, what could investors bring in from an investment in NWC stock?
Bottom line
In the last year, shares of NWC stock have risen by 18% as of writing. Let’s say this continues to happen in the next year. Add in that the stock also offers a dividend at 3.8%, amounting to $1.56 per share annually. Added together, let’s see how much passive income you could create in the next year from these same amounts.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY | PORTFOLIO TOTAL |
| NWC – now | $42 | 119 | $1.56 | $185.64 | quarterly | $5,000 |
| NWC – 18% | $49.56 | 119 | $1.56 | $185.64 | quarterly | $5,897.64 |
You’ve now made returns of $897.40, as well as $185.64 in dividends. Together, that’s a total of $1,083.28 in passive income!
