Valued at a market cap of $8.5 billion, Canadian Tire (TSX:CTC.A) is one of the most popular companies in Canada. Since the start of 1995, the TSX stock has returned 1,110% to shareholders, easily outpacing the broader markets. However, if we adjust for dividend reinvestments, cumulative returns are closer to 2,100%.
While Canadian Tire stock has delivered outsized gains to long-term shareholders, it has returned less than 60% in the last 10 years. As historical returns shouldn’t matter much to current and future investors, let’s see where the TSX dividend stock will be in three years.
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Is Canadian Tire stock a good buy right now?
Canadian Tire provides a range of retail goods and services in Canada. Despite a challenging macro environment in 2024, it reported an adjusted earnings per share of $12.62, up from $10.37 in 2023. In the fourth quarter (Q4), it returned to growth, with retail sales and comparable sales (excluding petroleum) up more than 1% across all banners.
“The quarter came to us as we expected,” Chief Executive Officer Greg Hicks told analysts. “In an uncertain consumer economy, we controlled the controllables, architecting sales through strategic promotion and effective margin management.”
Canadian Tire maintained its gross margin at 36% for Q4, keeping in line with its “North Star” target of 35.9%, despite increased promotional intensity at Canadian Tire Retail (CTR). Management successfully reduced normalized retail SG&A by $15 million, driven by lower supply chain costs, headcount savings, and reduced marketing expenses.
In a positive sign for consumer engagement, the company’s Triangle Rewards program showed momentum, with loyalty sales growing 4% in Q4 compared to 1% for the full year. Active membership grew to 11.7 million customers who shopped more frequently and spent more than in 2023. Triangle MasterCard holders increased spending at CTR by 2.4%, representing the first increase in card spending within the Canadian Tire family of companies in six quarters.
What’s next for the TSX stock?
Looking ahead to 2025, Canadian Tire faces uncertainty around potential U.S. tariffs, with 15% of its goods sourced directly from the United States.
Chief Financial Officer Gregory Craig noted that while Canadian Tire is entering the year with plans for “flat to modest top-line growth,” it will monitor economic conditions and consumer demand over the next 100 days before finalizing buying assumptions for the fall/winter season.
Hicks emphasized the company’s preparedness to manage through tariff challenges: “Our broad assortment includes multiple brands at various price points and sourcing from different countries with varying tariffs and foreign exchange exposure. It’s this diversity that offers some natural substitutability between products and helps us shield both ourselves and our customers from some of the pricing pressures.”
Canadian Tire will soon detail its new corporate strategy, building on the $1.8 billion invested since 2022 to advance its retail omnichannel network, supply chain, data, and technology capabilities.
Analysts tracking Canadian Tire stock expect adjusted earnings to expand from $12.62 per share in 2024 to $16 per share in 2027. Today, the TSX stock is priced at 11.6 times trailing earnings. If priced at a similar multiple, CTC stock should trade at $186 per share in March 2028, indicating an upside potential of 25% from current levels.
Canadian Tire also pays shareholders an annual dividend of $7.10 per share, indicating a yield of 4.8%. These payouts have risen at an annual rate of 13.3% in the last two decades.
