After market close today, Canadian retailer The North West Company (TSE: NWC) released its Fiscal Q2-2022 earnings results. While earnings per share (EPS) missed expectations, revenue slightly surpassed expectations. The company also raised its dividend per share by 2.7%, bringing its quarterly dividend to C$0.38 per share.
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The North West Company’s revenue of C$578.9 million grew 2.4% year-over-year, just slightly beating the consensus estimate of about C$577.6 million. However, this sales growth did not bring along profitability growth. NWC’s adjusted earnings per share came in at C$0.67, missing the C$0.69 estimate, and its Q3 adjusted net income of C$33.96 million fell 24.1% compared to last year’s figure of C$44.75 million.
In addition, North West’s adjusted EBITDA fell from C$84.07 million last year to C$72.62 million in Q2, causing its adjusted EBITDA margin to reach 12.6%, falling 230 basis points. Lastly, its overall gross profit fell 3%, as its gross profit margin dropped by nearly 180 basis points due to inflationary pressure and a change in sales mix.
What Does The North West Company Do?
The North West Company is a Canadian retail company that caters to underserved rural communities and urban neighborhoods. The company provides food, family apparel, housewares, appliances, and outdoor products, with food products accounting for the majority of the company’s revenue. It also offers services, including post offices, income tax return preparation, money transfers, and more.
Is NWC a Good Stock to Buy?
According to analysts, the North West Company earns a Hold consensus rating based on four unanimous Hold ratings assigned in the past three months. The average NWC stock price prediction of C$39.25 implies 15.3% upside potential.
Is The North West Company’s Dividend Worth It?
NWC currently pays a juicy dividend, with its yield coming in at around 4.3%. However, its five-year dividend compound annual growth rate (CAGR) is only 3.2%, with its recent 2.7% increase almost matching that. Therefore, NWC stock is probably not the best option for dividend-growth investors or for high-yield dividend seekers.
Nonetheless, with a payout ratio hovering around 50%, North West’s dividend seems safe, and the company could increase its dividend further if it chose to do so.
Conclusion: North West’s Q2-2022 Results Were Mixed
The North West Company’s Q2 results were mixed, with sales beating expectations and increasing slightly while earnings dropped year-over-year and missed consensus estimates. Nonetheless, the dividend increase is a vote of confidence and should be welcomed by investors. Also, while analysts are neutral on the stock, the average price target still implies decent upside potential.
