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North West chief executive Edward Kennedy said the company will consider raising the dividend as the year progresses, depending on results across its operations.John Woods

A focus on better-selling food and financial services products in markets that some retailers consider too remote is attracting investors to North West Co. Inc., a low-volatility stock with a juicy dividend.

Still, some analysts are cautious on North West's near-term growth after the company held off on a regular annual dividend increase as it spends millions to revamp operations in its largest Northern Canada division.

Shares of Winnipeg-based North West, which sells consumer goods and services to rural communities and some urban markets across Canada, Alaska, the South Pacific islands and the Caribbean, are trading near their 52-week high after the company reported an overall improvement in annual and quarterly revenue.

Sales at North West, which operates 225 stores under banners such as NorthMart, Giant Tiger, AC Value Center and Cost-U-Less, are getting a boost in part from the extra cash consumers have in their pockets from lower gasoline prices.

A recently announced plan to spend $150-million over three years to refresh stores in Canada's north is also a promising sign, analysts say, as the company moves to increase the amount of faster-selling food, pharmacy and financial services items, such as cheque cashing. The company is also pulling back on goods that sit on the shelf for too long, such as clothing.

"It's a nice intersection between the economic environment giving them a bit of improvement and operationally they have a lot of stuff they've either fixed up recently, or that is in process of paying off," said Neil Linsdell, an analyst with Industrial Alliance Securities Inc. "The reason people buy this story is for the nice dividend," which yields about 4.5 per cent.

He increased his price target to $27.50 (up from $25) and his rating to "buy" from "hold," after the company reported its latest results last week.

Sales were up 7.6 per cent for the fourth quarter ended Jan. 31, driven by stronger international operations and the impact of the lower Canadian dollar against the U.S. currency. About 35 per cent of the company's revenue is outside of Canada. The company also took a $3.8-million charge related to the writedown and discontinuance of merchandise that wasn't selling at its Northern Canada stores.

CIBC World Markets analyst Mark Petrie expects earnings to improve in North West's Northern Canada business but said it's "premature" to look that far ahead.

"We view NWC as a core holding for dividend-focused investors, but also see limited capital upside," Mr. Petrie said in a note, referring to the company's stock symbol. He has a "sector performer" (similar to "hold") on the stock and a $26 target.

Among six analysts that cover the stock, five have a "hold" or equivalent rating, while one says "buy," according to S&P Capital IQ. The analyst consensus price target over the next year is $26.08. The stock has been relatively flat over the past 12 months, trading between $21.93 and $26.80. North West was recently added to the S&P TSX composite low-volatility index.

North West held off on its annual dividend hike, which is usually announced heading into the new fiscal year.

Barclays Capital analyst Jim Durran, who has an "equal weight" (similar to "hold") and $25 target on the stock, said the company is being conservative given the spending it's doing to restructure part of the business. In a note, he said there is "some risk" North West won't increase the dividend this year.

North West chief executive Edward Kennedy said the company will consider raising the dividend as the year progresses, depending on results across its operations.

"We realize that our proposition to investors is growth and yield, and we certainly want to sustain our yield and grow [it]," Mr. Kennedy said. "We are comfortable in waiting to see how the year unfolds."