After rallying for 15 consecutive years, shares of Alimentation Couche-Tard (TSX:ATD) have turned negative in 2024. Despite the TSX Composite’s 17% increase this year so far, ATD stock has seen around 8% value erosion to currently trade at $72 per share with a market cap of $68.3 billion. At this market price, it offers an annualized dividend yield of 1%. Though too modest, this yield is mainly backed by Couche-Tard’s strong fundamentals and reliable business model. For Foolish investors who prioritize long-term gains over high immediate yields, ATD stock could be a solid choice.
In this article, I’ll dive into the core factors that make Couche-Tard stock worth considering on the dip right now, including its financial health, growth outlook, and why this 1% yield may appeal to growth-oriented investors.
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A quick look at Couche-Tard’s financial health
If you don’t know it already, Couche-Tard mainly focuses on its convenience retail and fuel business, operating under brands like Circle K across North America and Europe. Known for its disciplined approach to growth, the company has successfully expanded its footprint in several countries over the years and boosted profitability while maintaining strong cash flows.
Couche-Tard’s financial strength is one of its biggest advantages. In its fiscal year 2024 (ended in April 2024), the company reported revenues of US$69.3 billion, with profits of US$2.7 billion, even in a tough retail market. A big part of these stable profits came from its reliable convenience store and fuel businesses, which continued to bring in steady cash flow. With $1.3 billion in cash reserves and the end of the fiscal year, Couche-Tard was in a great position to manage short-term needs and keep expanding.
Showcasing strength amid challenges
Although consumer spending and other key economic indicators remain weak, Couche-Tard’s results for the first quarter of its fiscal 2025 (ended in July 2024) showed its ability to adapt and keep sales strong. During the quarter, its total revenue jumped 17% YoY (year-over-year) to US$18.3 billion due mainly to strategic acquisitions and growth in wholesale fuel sales.
Despite facing pressures from inflation and tighter consumer spending, Couche-Tard’s acquisition strategy continues to be a major driver of its revenue growth. For example, its recent purchase of over 2,100 sites in Europe from TotalEnergies boosted the company’s revenue diversification and broadened its geographic footprint, helping offset challenges in its same-store sales. Moreover, the consistent strength in its fuel segment continues to support Couche-Tard’s long-term growth plans despite short-term economic headwinds.
Is Couche-Tard stock a buy?
Recently, Couche-Tard announced plans to acquire approximately 270 GetGo Café + Market locations in the U.S., which are likely to expand its reach in states like Ohio and Pennsylvania.
Although it’s true that Couche-Tard may not offer a high dividend yield, its steady growth in revenue, cash flow, and recent acquisitions make it really attractive for investors seeking long-term stability. Moreover, the company’s strong balance sheet, diverse revenue streams, and strategic expansion into new markets give it a competitive advantage over the competition, making it one of the top retail stocks to hold for years to come.
