I’m pretty confident that there will always be a healthy number of frugal people in this world. So last Friday, as some of you may already know, I purchased 15 shares of Dollarama Inc (DOL). Each share was purchased at $87.61 for a total investment amount of $1,324.
This is a dollar store chain with over 800 retail locations across Canada. The reason I decided to invest in this company is because I’m really impressed with how fast it’s expanding, and don’t want to miss out anymore on that growth. It’s also a recession proof company. There are frugal consumers when times are good, and there are even more of them when times are bad. So Dollarama has a very solid customer base that is not going anywhere. Here’s a look at how much profit Dollarama made in the last several years.
2010 – $73 million
2011 – $117 million
2012 – $173 million
2013 – $217 million
2014 – ??? (not released yet)
That looks like a pretty good track record of growing profitability to me 😉
The stock has been going sideways for the last 6 months or so but I think it’s about to start climbing again soon, which is why I decided to buy some now. The snow storms during last winter in Canada knocked out a lot of power for businesses in Ontario and Quebec which meant many Dollarama stores were out of commission during that period.
The company is announcing its latest earnings on April 9th later this week. A lot of analysts are expecting the earnings to underperform due to the extreme weather problems last quarter. This is why the stock isn’t higher today. Many investors believe the earnings will look bad. But I think this represents a good opportunity to use the current pessimism in the market to buy DOL shares at a relatively low price.
I agree with most analysts that Dollarama’s profits will be disappointing this time. But I also think the negative sentiment towards the stock is blown out of proportion. Once the earnings are made public on April 9th I expect the company will begin to outperform once again 😉 Who knows, maybe we’ll even get a dividend increase heh (^_^) So that’s why I want to get in before the company financials are released.
Will this new investment bring me closer to retirement one day or will my 15 DOL shares become dead money? I don’t know. We’ll see how other investors react to the earnings on April 9th. I believe Dollarama is a solid long term investment for me 🙂 It operates in a quasi monopoly much like Cineplex does. It’s sheer size and national reach gives Dollarama a great advantage over its smaller competitors 🙂 I plan to hold this company in my TFSA for at least 20+ years.
Buying Dollarama stocks is very straight forward if you already have a brokerage account. Simply create a new buy order and search for the ticker symbol DOL on the Toronto stock exchange, and choose how many shares you want to buy. More details here.
Random useless fact: How to say pineapple in different languages
Dollarama started off as a great place to get some really good deals. The problem with running dollar stores is trying to find products to sell for a dollar while inflation constantly wages war with your bottom dollar. Your costs always goes up so either the price increases or the quality suffers.
You used to buy a lot of things for a dollar, but now they cost a $1.50 or $2.00. I remember seeing a college student stocking up on cleaning supplies and she bought a small bottle of dishsoap for $2.00. She could have easily gone to a major grocery store and bought a bottle twice the size for $2.50. Of course you have to watch your prices wherever you go, but I’ve also never seen an independent dollar store last for more then 5 years before either.
It will be interesting to see which direction Dollarama will take in the next few years. If they can use their buying power to keep costs low then it might be a viable investment for the long term.
Yeah many items were introduced at the $2.50 point starting in 2012. it’s a pretty competitive space. Maybe 10 years from now we’ll start to see $4 or even $5 dollar items as well. Stock market in general hasn’t done very well this week so far. Hopefully that will pick up soon 🙂 RBC is giving DOL a price target of $101 but we’re still waiting for the earnings report.
$4 dollar items only 2 years after this post instead of 10 and stocks are $101 today.
Crazy times we live in, eh. 🙂
I remember looking at DOL in the past and being intrigued by the strong growth and financials of the company, like you outlined in this post.
My immediate concern was P/E at ~30. (*Of course P/E is only one metric of many metrics one must use to gauge an investment).
I also share the concerns The Loonie Bin outlined above. Another concern is whether Dollarama is able to differentiate (build a moat) against other dollar stores or will it participate in a fierce competition of price cutting in order to compete against other dollar store, affecting profits.
Concerns aside, I do agree dollar stores like Dollarama are alluring potential investments.
I hope that P/E ratio will move lower in the years to come as the price rises to match valuation. It will probably mean slower growth at that point but the stock should be more stable 🙂
Dollar stores in general seem to be something that will not go away anytime soon. I think you are right about it being reccesion proof. There are always customers for frugalness! Thanks for the breakdown!
I like how dollar store’s beta are pretty much zero. Sometimes when the stock market index moves up, Dollarama’s price moves down haha. I suppose it’s a good hedge against market volatility in a way.
I guess I missed the boat. I should have bought at 50 range. I still like this stock, but the yield is very low to hold in tough time 🙁
Yes, and the coffee business is a tough one. They tried expanding into the U.S. but only lost a bunch of money and couldn’t compete with Dunkin’ Donuts and Starbucks 🙁 Maybe there will be an opportunity to buy later during a pull back or something.
Wow Liquid, you made an amazing move, this stock jumped more than 8% or $6.93 after you bought. Congrats!!!
Thanks Arun 🙂 The earnings released this morning seemed to have caught analysts by surprise. The dividend hike is a nice bonus too.
Hi, just wondering how one goes about buying stocks in Vancouver? The concept of stocks sounds intriguing! I’d love to learn more.
PS: I recently found your blog and have been loving it so far. I learned so much about managing my own finances so thank you 🙂
Thanks for the feedback Winnie. Yes, stocks are very interesting and are an important part of a well balanced financial strategy. There’s a section about “how to buy stocks” on the stock market investing page. Have a look through that and you may contact me if you have any specific questions.
I think you made an excellent decision, the progression is excellent and there’s no doubt it will benefit you. Congrats on the choice.
Huh, I didn’t know pineapple was called ananas in so many languages!
Interesting. I think most of those kinds of shops here are independent ones and I definitely wonder how they manage to stay in business.
Props to small business owners. Brick and mortar companies are becoming harder and harder to run thanks to growing presence of online retailers.
[…] this year I wrote a post about buying Dollarama stocks. I mentioned $DOL has a history of growing profits and I like the financials of the business. I […]
I am new to investing. How would one buy stocks in Dollarama?
There’s a “how to buy stocks” section on my page about stock investing. 🙂 https://www.freedomthirtyfiveblog.com/investing/stock-market-investing