But, there's money to be made when it comes to Canadian stocks and the Canadian stock market, especially in the environment we're heading into, that being a re-opening of the economy and rising interest rates.
In fact, I've achieved annualized returns of over 22.76% over the last five years since I swapped my strategy to specifically target Canadian growth stocks.
The lottery is a great business, but unfortunately the government benefits the most.
Pollard Banknote is the number 2 producer of instant lottery tickets in the world. This is the core of Pollard’s business, and it’s a very good business.
The business has high barriers to entry as there are regulations about importing lottery tickets, so Pollard is likely to hold on to its competitive position.
Pollard has grown its instant lottery ticket revenues at a 9% compound annual growth rate since 2012.
The most exciting part about Pollard is its 50% ownership in NeoPollard Interactive.
This is a 50-50 joint venture with NeoGames that is focused solely on the iLottery space, giving states the ability to operate lotteries on the internet.
This is a very new industry, but it is growing rapidly and NeoPollard Interactive is the most successful operator in the industry.
Just 8 states offer instant lotteries on the internet, and NeoPollard operates three of them. And the iLotteries in NeoPollard states have much better higher penetration, indicating that NeoPollard is better than its competitors.
We think it’s inevitable at this point that eventually every jurisdiction that runs lotteries now will add iLottery and given NeoPollard’s success so far, I expect NeoPollard is going to win a lot of business as states and countries legalize it.
The growth in Pollard’s base instant lottery ticket printing business, and its new iLottery business, will ensure the company keeps up its excellent growth.
Over the last 5 years, Pollard has grown revenue 13.7% annually, and it has grown its bottom line even faster, with earnings per share growth of 28.8% per year.
Growth was slower in 2020 because of COVID-19 lockdowns, but analysts expect growth to accelerate again in 2021. Analysts are estimating that Pollard’s revenue will grow 13.3% and earnings per share to grow 7.3%.
But that should just be the beginning. If iLottery takes off like we think it will, Pollard is going to grow into a much larger company. Even though iLottery is just starting, Pollard Banknote has already proven to be a fantastic investment for shareholders. A $10,000 investment in Polalrd when it went public in 2005 would be worth over $91,400 today.
Over the last year the stock price is up 261% as investors are catching on to the potential of its iLottery business.
Pollard pays a modest dividend, with the yield currently 0.29%. But Pollard does look like it will be growing its dividend.
The company raised its dividend by 33% in 2019, and as earnings grow and the iLottery business matures, I expect the dividend will grow a lot as well.
Bottom line is there is an opportunity to invest in Pollard at the start of a revolutionary growth story, all while Pollard’s core business continues to produce profits.