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Dollarama's growth story reaches new heights

Clerk Nelson Suerte stocks shelves at a Dollarama store in Vaughan, Ont. The chain is opening roughly one new store a week.

Jennifer Roberts for The Globe and Mail/jennifer roberts The Globe and Mail

Dollarama Inc. keeps doling out the good news.

Since going public in 2009, the company's stock price has climbed steadily, with just one dip in early 2010. That of course has been good for investors. And because the share price has performed so well, private equity player Bain Capital has been able to unload more and more shares and higher and higher prices. That's been good news for Dollarama's Canadian bankers, who were able to generate fees on three more secondary offerings in 2010.

Given Dollarama's latest earnings announced on Thursday, Bain looks quite capable of selling the remaining 15 per cent stake it owns. Not only did the company's earnings beat estimates, but Dollarama also instituted a new 7 cent quarterly dividend, translating into a yield of about 1.2 per cent. Not much for now, but it's a start.

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Investors must be smiling. Although Dollarama's shares didn't skyrocket right after the IPO, like they did in some big resource deals, they have had steady, almost calculated growth, and are now up about 60 per cent from the IPO.

Gibson Energy adopted the same mentality when it priced its IPO on Wednesday. Sure the $16 per share was below the marketing range, but private equity backer Riverstone would rather see the shares climb higher so they can sell off at better prices in the future.

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About the Author
Reporter and Streetwise columnist

Tim Kiladze is a business reporter with The Globe and Mail. Before crossing over to journalism, he worked in equity capital markets at National Bank Financial and in fixed-income sales and trading at RBC Dominion Securities. Tim graduated from Columbia University's Graduate School of Journalism and also earned a Bachelor in Commerce in finance from McGill University. More

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