Canadian Tire (TSX:CTC.A) has seen a 13% gain over the past 10 months, now trading at $143.99 per share with a market cap of $8.3 billion and a dividend yield of 4.9%. However, despite the recent gains, the stock has underperformed the TSX Composite Index, which has gained over 16% in the same period.
With declining interest rates and shifting consumer spending patterns, what’s next for Canadian Tire stock? Can it outperform the market over the next five years, or will it continue to lag behind? In this article, I’ll analyze Canadian Tire’s key growth drivers and long-term outlook to find out where this top dividend stock could be five years from now.
Why Canadian Tire stock has underperformed
One of the main factors behind Canadian Tire’s underperformance is the challenging macroeconomic environment. Of late, consumer spending has been shaky. While essential categories like automotive saw some growth, discretionary spending, especially things like home decor and leisure products, took a hit. That’s a big deal for a retailer like Canadian Tire, which relies on customers making those extra purchases beyond just the basics.
It is also important to note that many retail stocks have underperformed the broader market in the last few quarters as investors remain cautious. A lot of that hesitation comes from concerns about the retail sector’s short-term growth outlook. But here’s the interesting part. Despite these challenges, Canadian Tire is actually putting up some strong numbers.
A closer look at Canadian Tire’s financial growth
A solid December performance helped the company deliver strong fourth-quarter financial results. Last quarter, its total revenue climbed by 1.5% YoY (year over year) to $4.51 billion. The comparable sales across its banners were also up 1.1% YoY, marking a return to growth.
More importantly, Canadian Tire’s diluted quarterly earnings more than doubled to $7.37 per share, reflecting an impressive gain considering the overall softness in retail sales.
Interestingly, its loyalty program called Triangle Rewards played a big role here. Sales tied to loyalty members increased by 4% YoY, and the company brought in nearly half-a-million new and returning members in 2024. More engagement means more spending, and Canadian Tire is clearly leaning into that.
What’s in store for the next five years?
The big question is whether Canadian Tire can keep this momentum going over the next five years. And based on what they’re doing, there’s a strong case for optimism.
For one, the company has been making smart investments. It’s expanding retail square footage and strengthening its supply chain. That means better efficiency and a more modern shopping experience for customers, something that could pay off well as consumer confidence rebounds.
Then there’s e-commerce. Canadian Tire raked in $1.1 billion in online sales last year, showing it can compete in the digital space. With more shoppers shifting to a mix of in-store and online purchases, the company’s push to integrate its digital and physical shopping experience could be a game-changer in the coming years. Predicting exactly where Canadian Tire stock will be in five years is tough, but with its strong fundamentals and growth plans, it wouldn’t be surprising to see a strong rally in the coming years.