STANTEC INC. $27.36 - Toronto symbol STN

STANTEC INC. $27.36 (Toronto symbol STN; TSINetwork Rating: Extra Risk) (780-917-7288; www.stantec.com; Shares outstanding: 45.7 million; Market cap: $1.3 billion; Dividend yield: 2.2%) sells a range of consulting, project delivery, design/build and technology services. The company’s clients operate in a wide variety of markets, including industry, environment, transportation and construction.

In the three months ended March 31, 2012, Stantec’s revenue rose 7.4%, to $439.1 million from $408.7 million a year earlier. Acquisitions were one reason for the gains. Stantec is also working on several new projects. Earnings rose 4.5%, to $24.9 million, or $0.55 a share, from $23.8 million, or $0.52 a share.

Stantec continues to grow by acquisition. In 2011, it bought five companies. Its purchases this year include engineering-consulting firm Cimarron Engineering Ltd., which develops, designs, installs and maintains oil and gas pipeline systems and station facilities. Demand for these services is growing quickly.

Continually buying and integrating new companies adds risk—including the risk of writedowns. The company cuts its costs by sharing administrative expenses, financing and employee benefits among its divisions.

Stantec began paying dividends for the first time with a quarterly payment of $0.15 a share in April 2012. The shares now yield 2.2%.

Stantec is a buy.

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