Improved same-store sales across Canadian and international markets, plus the addition of new stores, led to a 6.2% sales jump for this retailer in the most-recent quarter.
A recovering mining industry—plus government’s local investments—continues to boost consumer spending and this 30-year dividend-payer’s prospects.
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NORTH WEST CO. (Toronto symbol NWC; www.northwest.ca) sells food and everyday products and services through 244 stores. Those locations are mainly in northern communities across Canada and Alaska. The company also operates in remote regions of Hawaii, the South Pacific and the Caribbean.
North West signed a 30-year deal in 2002 with Ottawa-based Giant Tiger for the exclusive right to open and operate Giant Tiger general merchandise stores in Western Canada. It now operates 44 stores. Giant Tiger has over 200 locations elsewhere in Canada.
A 2017 airline acquisition has let the company cut its freight costs, while at the same time let it expand its e-commerce capabilities with faster, more efficient shipping.
Overall earnings gained 22.6%, from $62.9 million in 2015 to $77.1 million in 2017. Due to more shares outstanding, per-share earnings rose at a slower rate of 21.7%, from 1.29 from $1.57.
Writedowns and restructuring costs cut the company’s earnings to $1.36 a share (or a total of $67.2 million) in 2018. However, earnings recovered to $1.77 a share (or $86.7 million) in 2019. If you exclude unusual items, overall earnings fell 3.5% in fiscal 2019.
Dividend Stocks: Improving economic conditions should spur earnings
North West’s outlook remains positive, especially in Canada and Alaska. In Northern Canada, economic growth—led by increased mining activity and higher government spending on infrastructure and indigenous programs—continues to rebound after several sluggish years.
Alaska’s economy is also recovering rapidly, led by stronger commercial fishing, increased oil and gas activity, and greater public spending on infrastructure programs.
In the quarter ended April 30, 2019, the company’s overall sales rose 6.2%, to $494.5 million from $465.7 million a year earlier. Improved same-store sales for North West’s Canadian and international operations, plus the addition of new stores, spurred those gains. The higher overall sales were only partially offset by weaker sales at Giant Tiger due to colder-than-usual weather and increased discount food competition.
Earnings in the quarter jumped 41.7%, to $26.2 million, or $0.52 a share, from $18.5 million, or $0.36. However, excluding one-time items, earnings per-share actually fell 5.6% to $0.34. That was partly due to the costs of moving the company’s buying office from Washington state to both Anchorage, Alaska, and South Florida to be closer to the markets they serve.
All in all, the outlook for the company remains positive, especially in Canada and Alaska. Resource spending is recovering steadily and government spending on infrastructure and social programs continues to rebound after several sluggish years.
North West has paid regular dividends for the past 30 years. It last raised that quarterly payment in April 2019. The shares yield a high 4.4%.
Their dividend payout as a percentage of their free cash flow is 190% and the dividend paid has decreased yearly by about 1% over the past ten years. Do you think this is a good investment?
Thanks, Vito. We continue to see North West as a buy for long-term gains and for income. The outlook for the company in its niche markets is good and its cash flow covers its payout. There is room for dividend growth.
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Their dividend payout as a percentage of their free cash flow is 190% and the dividend paid has decreased yearly by about 1% over the past ten years. Do you think this is a good investment?
Vito Lai
Thanks, Vito. We continue to see North West as a buy for long-term gains and for income. The outlook for the company in its niche markets is good and its cash flow covers its payout. There is room for dividend growth.