Alimentation Couche-Tard: Expect Big Dividend Growth Going Forward

Alimentation Couche-Tard: Expect Big Dividend Growth Going Forward 

There haven’t been many growth stories more exciting than Alimentation Couche-Tard Inc. (TSX:ATD.B) over the last few years.

The convenience store giant has been making a number of big acquisitions. It bought 2,300 European stores from Statoil, the Norwegian energy behemoth in 2012.

It followed that up by buying 130 stores in a number of small deals in 2013, 68 stores in 2014, 1,500 stores from The Pantry, Inc., in 2015, and nearly 1,000 stores from various sources in 2016.

In total, the company has more than 12,000 locations worldwide, and management is eager to acquire more. With many major oil companies looking to divest their retail operations, there are plenty of acquisition opportunities still available.

Couche-Tard has the balance sheet strength to make a deal. It has a debt-to-EBITDA ratio of less than 1, and management has done a nice job of deleveraging after big deals in the past.

There’s just one problem, at least for dividend-growth investors. The stock currently pays a paltry 0.6% yield. That’s not very exciting.

But this is changing. The board has hiked the dividend twice in the last year, upping the payout from $0.07 to $0.09 per share each quarter. The payout ratio is just 14% of trailing earnings, which is exceptionally low.

The company has shown it’s becoming more serious about paying investors. Long-term investors wanting a company with huge potential to hike the dividend don’t have to look any further than Couche-Tard. It might not pay much today, but the potential is certainly there.