Canadian Tire Corporation Ltd (TSX:CTC.A) has been falling hard in 2020, down around 40% since the beginning of the year.
The company’s had to reduce its hours as well as temporarily close some of its stores in response to the coronavirus pandemic. Retail stocks were already pretty risky even before these latest headwinds.
However, Canadian Tire’s generally been one of the safer retail stocks to own as it benefits from strong customer loyalty and its stores have been resilient over the years.
For dividend investors, it could be an opportune time to buy shares in Canadian Tire. The stock pays a quarterly dividend of $1.1375 that today would yield 5.3% annually.
That’s well above where its yield normally is. It’s also been growing its payouts at a rapid rate – in 2017, it was paying quarterly dividends of $0.65 per share. The company’s hiked the payments by 75% since then.
However, there’s definitely some risk here because the longer the coronavirus pandemic keeps customers at home and not in stores, the more pressure there will be on the company to suspend its dividend.
The good news, however, is that the dividend would likely return anyway. Canadian Tire’s been focused on paying and growing its dividend payments over the years and it would seem unlikely that the coronavirus pandemic would change its strategy.
While the pandemic will create short-term problems for the company, over the long term, Canadian Tire is still a solid investment that generate significant dividend income for investors. And if it recovers back to where it was before the outbreak occurred – $150 – investors can also cash in on a rising share price as well.
