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What are we looking for?

Sustainable dividends from top Canadian infrastructure and construction-related firms.

The screen

The outcome of the upcoming federal election is uncertain – even more so following the surprise win by Nova Scotia’s Progressive Conservatives over the incumbent Liberals. But whichever party wins federally, much-needed attention to the country’s infrastructure is on the agenda.

That stimulus spending is a boon for Canadian engineering, construction and building-materials companies. It also bodes well for their future dividends.

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Our search started with a list of dividend-paying Canadian infrastructure/construction stocks. We then applied our TSI Dividend Sustainability Rating System to find those with strong growth prospects. Our system awards points to a stock based on key factors:

  • One point for five years of continuous dividend payments – two points for more than five;
  • Two points if it has raised the payment in the past five years;
  • One point for management’s commitment to dividends;
  • One point for operating in non-cyclical industries;
  • One point for limited exposure to foreign currency rates and freedom from political interference;
  • Two points for a strong balance sheet, including manageable debt and adequate cash;
  • Two points for a long-term record of positive earnings and cash flow to cover dividends;
  • One point if the company’s an industry leader.

Companies with 10 to 12 points have the most secure dividends, or the highest sustainability. Those with seven to nine points have above-average sustainability; average sustainability, four to six points; and below-average sustainability, one to three points.

More about TSI Network

TSI Network is the online home of The Successful Investor Inc. – the group of widely followed Canadian investment newsletters by editor and publisher Pat McKeough. They include our award-winning flagship newsletter, The Successful Investor. The TSI Best ETFs for Canadian Investors is the latest. TSI Network is also affiliated with Successful Investor Wealth Management.

What we found

Our TSI Dividend Sustainability Rating System generated six stocks.

Six dividend stocks that should benefit from Canada’s push to shore up infrastructure

Ranking*CompanyTickerDiv. Sustain. RatingPointsDiv. Yld. (%)Mkt. Cap. ($ Mil.)1Y Ttl. Rtn. (%) Recent Price ($)
1Toromont IndustriesTIH-TAbove Average91.38,812.745.1106.68
2Stantec Inc.STN-TAbove Average91.16,625.939.559.77
3WSP Global Inc.WSP-TAbove Average90.918,846.483.7160.79
4Bird Construction Inc.BDT-TAbove Average84.3477.935.29.02
5Aecon Group Inc.ARE-TAbove Average83.41,231.142.320.78
6Stelco Holdings Inc.STLC-TAbove Average81.74,072.0412.546.42

Source: Dividend Advisor

*Ranking is determined by TSI Dividend Sustainability Score. Where overall points are the same, analysts considered P/E, dividend yield and industry outlook to decide final placements.

Edmonton-based Stantec Inc. and Montreal-headquartered WSP Global Inc. provide the engineering and consulting services key to planning and building infrastructure. (Both have seen sharp share price climbs over the past couple of years, explaining their low yields.) Bird Construction Inc., based in Mississauga, acquired rival Stuart Olson last year to create a Canadian construction leader with top infrastructure experience.

Headquartered just north of Toronto, Toromont Industries Ltd. is a Canadian dealer for Caterpillar heavy construction equipment. Toronto-based Aecon Group Inc. is one of the country’s largest construction companies, with the Vancouver SkyTrain and Terminal 3 at Toronto Pearson International Airport among its successes. And Hamilton-based Stelco Holdings Inc. sells the high-quality steel integral to almost all infrastructure builds.

We advise investors to do additional research on any investments we identify here.

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Scott Clayton, MBA, is senior analyst for TSI Network and associate editor of TSI Dividend Advisor.

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