NORTH WEST COMPANY $30 (Toronto symbol NWC; High-Growth Payer Portfolio, Consumer sector; Shares outstanding: 46.9 million; Market cap: $1.4 billion; Dividend Sustainability Rating: Above Average; Dividend yield: 4.4%; www.northwest.ca) sells food, and everyday products and services at 245 stores. Those outlets are mainly in northern communities across Canada and Alaska. The company also operates in remote regions of Hawaii, the wider South Pacific, and the Caribbean.

In 2002, North West signed a 30-year deal with Ottawa-based Giant Tiger for the exclusive right to open and operate Giant Tiger general merchandise stores in Western Canada. North West opened three new Giant Tiger stores in 2018 and now operates a total of 44 of those stores.

The company gets 75% of its sales from food, with Canada contributing 62% of revenue.

Three decades of dependable dividends

North West has paid regular dividends for the past 30 years. It last raised that quarterly payment in April 2019. Investors now receive $0.33 a share, up 3.1% from $0.32. The new annual rate of $1.32 yields a high 4.4%.

The company’s revenue rose 24.0%, from $1.62 billion in 2015 to $2.01 billion in 2019 (fiscal years end January 31).

The higher revenue was partly due to acquisitions. In February 2017, North West paid $35.6 million in cash and shares for 76% Roadtown Wholesale Trading. That firm operates seven profitable stores in the British Virgin Islands.

Later that year, North West purchased North Star Air, a Thunder Bay-based airline providing cargo and passenger services within northwestern Ontario.

Food accounts for most of North West’s fiscal 2019 sales:

The purchase price was $30.8 million. North West has since expanded the fleet to let it handle freight to other areas of Canada. The 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.

As of January 31, 2019, North West held cash of $38.4 million. The company’s long-term debt of $369.5 million is a moderate 28% of its market cap.

Improving 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..

The company will likely earn $1.79 a share in fiscal 2020, and the stock trades at reasonable 16.8 times that forecast.

North West Company is a buy.