The firm’s regular string of new contracts and acquisitions should keep earnings and dividend payouts growing, as high-profile wins keep its name in front of potential new clients.
Existing operations still saw their revenue rise 11.0%, suggesting the core business is solid and expanding organically.
Meanwhile the stock trades at 21.7 times the company’s 2023 earnings forecast.
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STANTEC INC. (Toronto symbol STN; www.stantec.com) offers you exposure to this leading seller of consulting, project-delivery, design and technology services. Stantec’s clients operate in a variety of industries, including oil and gas, transportation and construction.
Stantec’s strong reputation continues to help it win new contracts. For example, the California High-Speed Rail Authority has selected the company to design an extension of the rail system from Merced to Madera, a key section between Los Angeles and San Francisco. The project involves re-routing utility infrastructure and planning the construction of 40 new structures.
The company will receive $41 million U.S. over the next two years, nearly 1% of its annual revenue of $5.3 billion (Canadian).
Stantec also uses acquisitions to spur its growth. It cuts related risk by targeting smaller firms that are easy to absorb.
Growth Stocks: Earnings and dividends continue to rise
Thanks to several purchases that Stantec completed in 2021 and this year, the company’s revenue in the quarter ended September 30, 2022, rose 24.3%, to $1.16 billion from $932.9 million a year earlier. If you factor out acquisitions, revenue improved 11.0%.
The company expects the combination of new contracts and acquisitions will increase its annual earnings by 11% annually. It will probably earn $3.30 a share in 2023, and the stock trades at a reasonable 21.7 times that estimate. The $0.72 dividend yields 1.0%.
Stantec last raised your quarterly dividend with the April 2022 payment. The dividend has grown at an average annual rate of 7.6% in the past five years. The stock holds an Above Average TSI Dividend Sustainability Rating.
STN is a little under the radar but has been a great compounder over the last 20 years. Their acquisition strategy has created a lot of wealth during those years. I think it is an excellent bet for individual investors.
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STN is a little under the radar but has been a great compounder over the last 20 years. Their acquisition strategy has created a lot of wealth during those years. I think it is an excellent bet for individual investors.
Thanks for your comment. SNL has been very successful in lowering the risk associated with growth by acquisition.