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Topic: Dividend Stocks

Finning’s strong heavy equipment sales back its 3.5% yield

Improved sales of equipment and services on three continents led to this company’s 15.4% revenue jump in the most-recent quarter.

Its latest dividend hike in June 2019 further adds to its appeal and supports its high 3.5% yield.

The Growing Power of Dividends

Learn everything you need to know in '7 Winning Strategies for Dividend Investors' for FREE from The Successful Investor.

The Best Canadian Dividend Stocks to Buy: REITS Canada and other Top Canadian Dividend Stocks.

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FINNING INTERNATIONAL INC. (Toronto symbol FTT; www.finning.com) sells and services Caterpillar-brand heavy equipment in Western Canada, South America and the U.K. Its main customers are in the oil, mining, forestry-products and construction industries.

Finning recently paid $260 million for 4Refuel. That firm operates a fleet of 200 tanker trucks that provide on-site re-fuelling services to companies in the construction, transportation, oil and gas, and power generation industries.

Starting with the June 2019 payment, Finning raised its quarterly dividend by 2.5%. Investors receive $0.205 a share, up from $0.20. The annual rate of $0.82 yields 3.5% and the company’s dividend has grown an average of 2.9% annually over the last 5 years.

In the three months ended June 30, 2019, Finning’s revenue rose 15.4%, to $2.00 billion from $1.73 billion a year earlier. That beat the consensus forecast of $1.8 billion.

Dividend Stocks: Revenue in three areas rose strongly

Specifically, revenue for the company’s Canadian operations (55% of the total) rose 18.4% thanks to strong demand for mining and construction equipment. The U.K. operations (15%) saw 8.9% higher revenue on stronger sales of new equipment to electric power projects. Its South American unit had a 13.6% increase in revenue (31%) on stronger new equipment sales to the mining industry in Chile.

Earnings in the quarter, excluding one-time items, rose 9.2%, to $88.1 million, or $0.54 a share. A year earlier, Finning earned $80.7 million, or $0.48. That also beat the consensus estimate of $0.42.

The gain reflects strong profitability for the Canadian business. On a per-share basis, earnings increased 12.5% due to fewer shares outstanding.

The company’s shares trade at 10.9 times the 2019 earnings forecast of $2.12.

Recommendation in Dividend Advisor: Finning International is a buy.

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