STANTEC INC. $36.68 - Toronto symbol STN

STANTEC INC. $36.68 (Toronto symbol STN; TSINetwork Rating: Extra Risk) (780-917-7288; www.stantec.com; Shares outstanding: 45.9 million; Market cap: $1.7 billion; Dividend yield: 1.6%) sells a range of consulting, project delivery, design and technology services. Stantec’s clients operate in a variety of industries, including transportation, construction and oil and gas.

In the three months ended September 30, 2012, Stantec’s revenue rose 12.4%, to $483.7 million from $430.4 million a year earlier. Acquisitions were one reason for the gains. Stantec is also working on several new projects. Earnings rose 17.9%, to $34.1 million, or $0.74 a share, from $28.9 million, or $0.63.

Stantec continues to grow by acquisition. In 2011, it bought five companies. Its purchases this year include engineering-consulting firm Cimarron Engineering, 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. Stantec cuts its costs by sharing administrative expenses, financing and employee benefits among its divisions.

The company began paying dividends for the first time with a quarterly payment of $0.15 a share in April 2012. The shares now yield 1.6%.

Stantec is a buy.

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