North West Company: Stock & Dividend Analysis

Canadians everywhere are fed up with the price of groceries.

I can see why, too. Going to the supermarket in 2026 is frustrating. Meat is outrageously expensive. The weak Canadian dollar is impacting the price of produce too, and not in a happy way. Ingredients everywhere keep getting more expensive, which translates into most everything in the middle of the store getting pricier, too.

Lots of folks blame Canada’s largest grocers, but my time in the industry gives me some sympathy. Grocers are just passing through price increases from producers and manufacturers. Larger grocers have better buying power and can influence prices a little bit, but ultimately they’re victims of the same inflation everybody else is.

I’ve always tried to invert my thinking. Rather than complain about the price of groceries, my view is I want to invest in a business where cost increases can get passed through without much consequence. If Canada’s grocers are able to do that, then I’m interested.

Just a few weeks ago we took a closer look at Metro (TSX:MRU), which I thought would be a more interesting buy in the low-$80 range. Shares are stubbornly hanging out around $90, so I’m content to wait.

We’ll keep the party going and look at a slightly different grocery stock today. North West Company (TSX:NWC) is the only player of size in Canada’s north, which comes with its own set of challenges — but also opportunities.

Let’s take a closer look.

With the recent bankruptcy of Hudson’s Bay, North West Company has taken the crown of Canada’s oldest company.

The company can trace its history all the way back to 1779. After the British takeover of New France, North West Company was formed by a bunch of recently arrived Scots. It sent a small army of merchants, agents, and voyageurs into the wilderness, working with Aboriginal trappers to acquire furs.

North West Company and HBC merged in 1821, and remained in the fur trading business as Canada became a nation. HBC land was eventually sold to Canada and the company pivoted into retailing. Canada’s North opened up after World War II with the Mackenzie Highway and air transport into the region. New settlers went up north looking for resource riches, and HBC saw an opportunity to sell them supplies. HBC called this the Northern Stores division.

In 1987 a group of investors — including 415 employees — purchased the Northern Stores Division from HBC. The new company adopted the North West Company name and logo in 1990, and was off to the races. It continued opening and acquiring stores in remote locations, including in Alaska and the Caribbean.

These days the company typically serves remote markets with between 500 and 8,000 people. A typical store is 7,500 square feet and offers a wide selection of services, including groceries, but also clothing, housewares, fast food, tax returns, and cheque cashing.

The company operates under a few different banners, including Northern, Northmart, Cost.U.Less, Rite Way, Alaska Commercial, and Giant Tiger. I mention Giant Tiger last because folks assume it owns the Giant Tiger brand in Canada, but it doesn’t. It operates just five stores under the Giant Tiger brand, compared to 121 Northern stores.

The chain has 230 stores in total, with 170 located in Canada and 60 in Alaska and the Caribbean. Canadian operations accounted for 57% of total sales in fiscal 2025 (which ended on January 31st), with food sales totaling 77.5% of total sales.

This is not the kind of business with huge growth, especially since COVID boosted the entire grocery business. Sales were $2.47B in 2023, increasing just 5.1% to $2.598B in 2025. EBITDA did better; it was up about 10% to $332.6M.

Remember, these are two year numbers, so revenue growth is closer to 2.5% per year while EBITDA growth is more like 5% annually. Not very exciting.

Same-store sales were up just 0.3% in 2025, with general merchandise sales down 4.5%. That was offset slightly by food sales up 1.1%. 2025’s results were disappointing versus 2024 and 2023, when same-store sales were up 4.4% and 2.9%, respectively. 2025’s same-store sales were impacted by a stronger USD and more lackluster results from the Caribbean.

Earnings growth has been lumpy over the last decade. The bottom line got a giant boost from COVID and then dipped in 2022, but has grown steadily since then. North West earned $3.29 per share in 2025. Analysts expect big growth in 2027 and 2028, which we’ll get to in a bit.

Groceries are expensive in remote areas; it’s a reality of living up there. Orders are flown in, making North West even more of a logistics company than its larger competitors. The good news is competition isn’t going to open a store down the street. But that’s offset by lower household incomes. Many customers struggle to afford groceries, which has limited the company’s ability to raise prices in the past.

It also means North West is more exposed to fuel prices versus its peers, which is part of the reason why 2026’s earnings are expected to not show much improvement versus last year.

It might not seem very exciting to invest in a company with low single digit revenue growth, but North West has some other things going for it. One is high returns on both invested capital and equity. Both these numbers are around 18%, and have stayed there for years.

The other thing I’d like to mention is the company’s pristine balance sheet. It has a debt-to-EBITDA ratio of under 1x. Net debt is less than $400M versus a market cap of $2.34B. This is far better than competitors — Loblaw has a debt-to-EBITDA ratio of 2.3x, for instance — and this is despite North West owning the majority of its stores, while competitors are much more likely to lease.

I bolded that last sentence because it’s important. The balance sheet isn’t just a little better than a Loblaws or a Metro, it’s massively better, and the graph below demonstrates just how much that has improved since 2019.

At first glance, NWC doesn’t look terribly attractive. The company earned $3.29 per share in 2025, and the stock currently trades hands for $49 per share. That puts us right around 15x earnings, which isn’t very exciting for a company that doesn’t grow very much.

It’s not super cheap on a forward basis, either. NTM P/E is 14.4x, while the mean over the last decade has been right around 15x. 2023 was the time to buy; shares were under 12x forward earnings.

Let’s look a little further ahead. Analysts are projecting 2027’s bottom line to increase substantially to $3.81 per share, and then again in 2028, to $4.16 per share. That’s a 14% increase, and then another 9% on top of that.

Obviously we should look at projections with a bit of a critical eye, but it’s still interesting. Why are analysts predicting such growth?

There are a few things happening. One is the company’s “Next 100” strategy, which looks to increase margins, optimize operations, negotiate better pricing from vendors, and make the supply chain more efficient. Gross margins were up in its most recent quarter, and management said Next 100 was a big reason why.

But that’s only a small part of the story. The federal government is set to make massive investments into the Northern part of the country, including big improvements to the Mackenzie Highway, modernizing four critical strategic military hubs, building a series of support hubs, commercial airport expansions, and loads more. We expect to spend more than $40B on these projects, with development and construction projected to extend until at least the early 2030s.

This is a huge amount of economic activity coming to the area. That should be a nice bump for the area’s biggest grocer.

There’s another potential source of stimulus for the region. First Nations affected by discriminatory underfunding of child and family services programs will collect a combined $23.34B from a class action lawsuit. Some of that cash will make its way into North West Company’s coffers. The government has also announced billions in new funding towards the programs it underfunded for so many years.

Put these two things together, and a bunch of money is headed towards the northern part of Canada in a couple of years. No wonder analysts are bullish. I am too.

North West Company offers a combination of decent yield today and dividend growth potential for the future.

Let’s start with that growth. The company converted from an income trust in 2010, and started off with a $0.24 per share quarterly dividend. That’s $0.96 per year.

Dividends have been raised fairly steadily since, settling into a pattern of annual raises starting in 2019. It has increased its dividend by $0.04 per share each year since. The payout is $0.41 per share quarterly, or $1.64 per share annually.

It works out to dividend increases of about 70% in 15 years, or about 5% per year. That’s not terrible, but also not overly exciting.

The good news is the payout ratio is been steadily creeping lower. In 2018, the company earned $1.72 per share while paying out $1.28 per share in dividends. That’s a 74% payout ratio. Last year it paid out $1.64 per share while earning $3.29 per share. That gives us a payout ratio of just 50%.

I expect NWC to keep up the pace and increase its payout by $0.01 per share each quarter in September when it announces Q2 earnings. That gives us a forward dividend of $0.42 per share each quarter, or $1.68 per share annually, and a forward yield of about 3.4%.

There’s a chance dividend increases get better as we get closer to 2028 and get more visibility into how business will improve, kind of like we saw in 2021.

Dividend security: About as high as you can get
Dividend growth: 2-5%

North West Company is the kind of stock I like a lot.

It has a very obvious moat, especially to those of us who have spent a little time in the northern part of the country. There’s no going down the street for a better deal if you live in Tadoule Lake, Manitoba. These are remote places.

The company has followed a pattern since it changed from an income trust to corporation in 2010. Earnings get a nice boost, followed by a few years of stagnant growth. Then something else happens and there’s another boost, followed by more consolidation. It happened in 2015, after COVID, and looks poised to happen again in 2027.

The balance sheet is also excellent, the dividend is fairly generous, and dividend growth has been predictable. The payout ratio has gotten much better over time, too. Return on equity and return on invested capital are both good too.

Normally I’m interested in a name like this one when it’s flirting with a 52-week low. That’s exactly how I bought this one in the first place in 2023. I paid about 12x forward earnings. We’re not quite that cheap today, but we’re pretty close if we use 2027 earnings as the E part of the P/E.

North West is an excellent company, and things are happening that should help it out. That’s enough to make me bullish.

Your author owns North West Company shares.