Dollarama Inc. (TSX:DOL) released its fourth-quarter and full-year 2016 earnings on Thursday, and the company continues to be one of the best growth stories in the Canadian market.
Fourth-quarter earnings increased 24%, increasing from $1.00 per share to $1.24. Total sales were up 11.5% and same-store sales increased 5.8%.
Full-year earnings were equally impressive. The top line increased 11.8% on the strength of 65 new stores. Net earnings for 2016 were $3.71 per share, a 23.7% increase versus 2015’s results.
Dollarama also unveiled a new growth plan which called for it to eventually open 1,700 stores in Canada, a goal it wants to accomplish within a decade. Other growth initiatives include introducing more items with $3.50 and $4 price points. The company will also start accepting credit cards.
Investors were pleased with the results. Dollarama shares shot up more than 8% in Thursday trading on the Toronto Stock Exchange, hitting $107.90 each. That’s a new all-time high.
Dividend investors were excited to hear the company announce it would be increasing its quarterly dividend by 10%, from $0.10 to $0.11 per share. Even after the increase, shares still only yield 0.41%.
The exciting part about Dollarama isn’t the current yield. Dollarama only has a payout ratio of 12% of trailing earnings.
It could easily afford to double or triple its dividend. That is exactly what dividend growth investors should be looking for.
We should be able to count on the company giving at least 10% annual raises for the foreseeable future.
