Dollar General vs Dollarama Which Is a Smarter Choice?

Dollar General and Dollarama are two leading discount retail chains that have gained popularity among budget-conscious consumers. Both companies have experienced significant growth in recent years, with Dollar General expanding its presence in the US and Dollarama dominating the Canadian market. Investors often compare the performance of their stocks as they navigate through changes in consumer spending habits and economic conditions. Understanding the key differences and similarities between Dollar General and Dollarama stocks can help investors make informed decisions about their portfolios.

Dollar General or Dollarama?

When comparing Dollar General and Dollarama, different investors may prioritize various metrics based on their investment strategies and goals. So, ask yourself what type of investor you are. This will guide you in determining which metrics are most important for your investment decision between Dollar General and Dollarama.

Dividend Investors:

Dividend investors look for stable and growing income streams, using dividend metrics to assess potential investments. A company's dividend yield essentially measures the size of its dividend relative to the total market value of the company. Dollar General has a dividend yield of 3.84%, while Dollarama has a dividend yield of 0.19%. Beyond the yield itself, considering the growth and sustainability of these dividends is also crucial. Dollar General reports a 5-year dividend growth of 9.39% year and a payout ratio of 36.63%. On the other hand, Dollarama reports a 5-year dividend growth of -4.10% year and a payout ratio of 7.87%.

Value Investors:

Value investors focus on financial metrics to determine a stock's intrinsic value compared to its market value. The Price-to-Earnings (P/E) Ratio links stock price to a company's earnings per share, with Dollar General P/E ratio at 11.93 and Dollarama's P/E ratio at 38.10. Another crucial valuation metric is the Price-to-Book (P/B) Ratio, which compares stock price with book value per share. Dollar General P/B ratio is 2.33 while Dollarama's P/B ratio is 34.93.

Growth Investors:

Growth investors prioritize metrics indicative of a company's expansion potential. Focusing on top-line growth, Dollar General has seen a 5-year revenue growth of 0.82%, while Dollarama's is 0.81%. Return on Equity (ROE) measures how effectively a company uses equity investment to generate earnings, with Dollar General's ROE at 20.62% and Dollarama's ROE at 187.36%.

Retail Investors:

Retail investors often consider stock affordability and company familiarity. For example, day low prices are $75.12 for Dollar General and $105.09 for Dollarama. Over the past year, Dollar General's prices ranged from $73.51 to $168.07, with a yearly change of 128.64%. Dollarama's prices fluctuated between $67.34 and $109.74, with a yearly change of 62.96%. Brand recognition also plays a role, as familiarity with a company can influence investment decisions.