Choosing between dividend stocks can be tough. Two companies can be fundamentally strong and give good dividend growth. Had it been a choice between a high-yield stock with no dividend growth and a low-yield stock with high dividend growth, the long-term returns would favour the latter. This is because dividend growth is an outcome of a growing company. However, the competition is tough between Canadian Tire (TSX:CTC.A) and its real estate subsidiary CT REIT (TSX:CRT.UN).
Canadian Tire vs. CT REIT
If we compare the two from a dividend perspective:
- Both offer a dividend reinvestment plan (DRIP).
- However, CT REIT has a five-year average annual yield of 5.6% compared to Canadian Tire’s 3.7%
- Both have been regularly paying and growing dividends annually for the last 11 years.
- However, CT REIT has grown its dividend at a compounded annual growth rate (CAGR) of 3.4% against Canadian Tire’s 16.3%
- CT REIT’s unit price increased 28.4% against Canadian Tire’s 46.8%.
What does this imply? Even though Canadian Tire has increased its dividends at a faster rate so has its stock price. I back-tested the dividends to see which stock gave higher returns.
A $10,000 investment in the two stocks in 2014 is today worth…
Assuming you invested $10,000 each in the two stocks on January 1, 2014.
CT REIT was trading at $11.15 at that time and $10,000 could have bought you 877 shares. Canadian Tire was trading at $99.54 at that time and $10,000 could have bought you 100 shares.
After 11 years, Canadian Tire increased its dividend per share to $7 in 2024, converting to $700 in annual dividends for 100 shares. CT REIT increased its dividend per share to $0.9252 in 2024 earning annual dividends of $811.48 on 877 shares.
CT REIT is a winner here.
However, if you compare the capital gain, $10,000 invested in Canadian Tire is worth $14,619, while in CT REIT it is worth $12,558. This is because Canadian Tire’s stock price grew at a faster rate.
What if you invested in the DRIP?
Which is a better dividend stock: Canadian Tire vs. CT REIT
The table below shows the DRIP calculation.
| Year | CTC.A Dividend per Share | CTC.A Stock Price Jan 1 | DRIP Shares | Total Shares | Annual Dividend Income | CT REIT Stock Price Jan 1 | DRIP Shares | Total Shares | Annual Dividend Per Share | Annual Dividend Income |
| 2024 | $7.00 | $140.44 | 6.07 | 129.62 | $907.37 | $14.70 | 85 | 1482 | $0.9252 | $1,371.34 |
| 2023 | $6.90 | $142.74 | 4.86 | 123.55 | $852.52 | $16.00 | 71 | 1397 | $0.8982 | $1,254.66 |
| 2022 | $5.85 | $183.73 | 2.96 | 118.69 | $694.33 | $16.94 | 61 | 1326 | $0.854 | $1,131.92 |
| 2021 | $4.70 | $168.05 | 3.05 | 115.73 | $543.92 | $15.69 | 61 | 1265 | $0.821 | $1,038.68 |
| 2020 | $4.55 | $139.82 | 3.25 | 112.68 | $512.68 | $16.00 | 54 | 1204 | $0.793 | $954.36 |
| 2019 | $4.15 | $141.70 | 2.71 | 109.43 | $454.13 | $12.94 | 82 | 1150 | $0.757 | $870.45 |
| 2018 | $3.60 | $163.72 | 1.67 | 106.72 | $384.19 | $14.36 | 50 | 1067 | $1.000 | $1,067.10 |
| 2017 | $2.60 | $140.01 | 1.70 | 105.05 | $273.13 | $14.92 | 44 | 1018 | $0.700 | $712.21 |
| 2016 | $2.30 | $116.67 | 1.83 | 103.35 | $237.71 | $12.71 | 48 | 973 | $0.680 | $661.78 |
| 2015 | $2.10 | $122.95 | 1.53 | 101.53 | $213.20 | $11.90 | 48 | 925 | $0.663 | $613.21 |
| 2014 | $1.88 | $99.54 | 100 | 100 | $187.50 | $11.15 | 877 | 877 | $0.650 | $570.05 |
In the above table, we have assumed that the dividend is reinvested annually on January 1 to buy DRIP shares for ease of calculation. Note that the actual calculation will be different as Canadian Tire reinvests quarterly, and CT REIT reinvests monthly. DRIP shares can be in decimal points.
In 11 years, 100 shares of Canadian Tire compounded to 129.62 shares, and they produced an annual dividend of $907. However, 877 CT REIT units compounded to 1,482 units and produced an annual dividend of $1,371. Moreover, the $10,000 investment in Canadian Tire is worth $18,950 at a share price of $146.19, and CT REIT is worth $21,225 at a unit price of $14.32.
Here, CT REIT is a winner because of a higher number of units.
Investor takeaway
Both are good dividend stocks and have delivered inflation-beating returns. Canadian Tire is a good investment for those looking for some extra cash and a decent capital gain in the long term. And CT REIT is a good investment where passive income is the main goal.