Wall Street tirelessly searches for disruptive startups, but savvy investors know the value of companies with deep historical roots. One such opportunity is The North West Company, a high-yield Canadian retailer dating back to 1668. With its unique focus on serving remote communities, The North West Company offers stability and consistent returns, making it a compelling choice for long-term investors.
Discovering a Legacy: Investing in The North West Company Inc.
While Wall Street tirelessly searches the San Francisco Bay Area for disruptive startups, some investors are drawn to the rich history and enduring legacies of companies with roots tracing back centuries. In this context, let’s dive into an intriguing Canadian dividend stock with a history dating back to 1668: The North West Company Inc. (TSX: NWC for Canadian investors and OTC: NNWWF for U.S. investors). This high-yield Canadian retailer operates in some of the most remote settlements in Canada, offering a unique investment opportunity for those seeking stability and consistent returns.
The Historical Legacy of The North West Company
The North West Company Inc. can trace its origins to the fur trading enterprises of the original North West Company and Hudson’s Bay Company. These companies played a significant role in the early economic development of Canada. For history enthusiasts, Stephen Bown’s book, „The Company,“ offers an excellent exploration of this fascinating period. Today, The North West Company continues to operate in many of the old Hudson’s Bay Company’s trading post locations, providing a direct link to Canada’s rich commercial past.
The Geographic Reach of The North West Company
The North West Company’s operations span multiple divisions, including Northern Store, NorthMart, and AC Value Center, all serving remote regions of Canada and Alaska. Additionally, the company owns the CostULess and Roadtown Wholesale chains, which operate in the U.S. and British Virgin Islands.
Arctic Bay: A Case Study in Remote Retail
Consider Arctic Bay, Canada, the northernmost community in the country, accessible only by plane or boat. With a population of just 994, the local Northern Store, owned by The North West Company, is a vital resource for residents, offering everything from clothing and toys to potato chips.
Fort Good Hope: Community Integration
In Fort Good Hope, a town of 516 people, the Northern Store not only serves as a retail hub but also houses the community’s post office. This integration into local life underscores the importance of The North West Company in these remote areas.
A Unique Investment Moat
Retail might not seem like the most exciting investment niche, but The North West Company’s geographic moat is significant. The logistical challenges and costs associated with flying construction supplies into remote Canadian towns and building rival stores create a natural barrier to competition. This moat has translated into consistent share price appreciation and dividend growth, making it a compelling investment opportunity.
The Fundamentals of The North West Company
Strong Performance Over the Decade
Canadian shares of The North West Company have delivered an average annual total return of 11.05% over the past decade. This performance surpasses many well-known retailers, including Kroger and Dollar General, and even outperforms some blue-chip household names like Starbucks and Disney.
Reasonable Valuation and Attractive Dividends
The North West Company trades at a price-to-earnings ratio of 14.22, which is quite reasonable. Canadian shares offer a starting dividend yield of 3.62%. The company has a 5-year compound annual dividend growth rate of 3.74%, paired with a safe dividend payout ratio of just 49.96%. While these numbers might not be eye-popping, they reflect a steady dividend growth stock that has consistently performed well.
Stability and Immunity to Disruption
Many of The North West Company’s stores are so remote that they’re virtually immune to disruption from larger retailers or e-commerce giants. This stability adds to the appeal of the stock for long-term, conservative investors.
Additional Investment Considerations
Trading Volume and Withholding Taxes
While The North West Company presents a solid investment opportunity, potential investors should consider a few factors. Shares listed in the USA under the ticker symbol NNWWF have extremely low trading volumes. Additionally, non-Canadian investors will be subject to Canada’s 15% dividend withholding tax.
Strategic Buying Approaches
Non-Canadian investors interested in The North West Company might want to use a platform like Interactive Brokers to access Canadian-listed NWC shares. Alternatively, they can set limit orders and be patient when buying U.S. shares to manage the low trading volume effectively.
The North West Company in the Community
Commitment to Remote Communities
The North West Company’s presence in remote communities goes beyond retail. The company plays a crucial role in the social and economic fabric of these areas, often serving as a lifeline for essential goods and services.
Corporate Social Responsibility
The company’s commitment to corporate social responsibility is evident in its various initiatives aimed at improving the quality of life in the communities it serves. These initiatives include health and wellness programs, educational support, and environmental sustainability efforts.
Conclusion: Embracing a Legacy of Stability and Growth
The North West Company represents a unique investment opportunity, blending historical significance with modern retail success. Its geographic moat, consistent financial performance, and commitment to remote communities make it a standout choice for long-term, conservative investors. By understanding the company’s strategic advantages and considering the associated risks, investors can make informed decisions that align with their financial goals.
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Disclaimer: This article is for entertainment purposes only. It is not financial advice. Always conduct your own research before making investment decisions.