Is This Canadian Dividend Aristocrat About to Take Flight?

With its dividend yield of 5.5%, is now the right time to invest in Bird Construction?

The Motley Fool

Bird Construction (TSX: BDT) is a member of the Canadian Dividend Aristocrats,  an index that tracks an exclusive group of companies that have followed a policy of consistently increasing dividends annually for at least the last five years.

With the Canadian government’s recent announcement of the new $14 billion New Building Canada Fund, is Bird Construction about to take flight?

New Building Canada Fund

With the New Building Canada Fund, the federal government has committed to investing $14 billion in infrastructure over the next 10 years. The plan will fund will a wide range of projects in areas including transportation, public transit, drinking water, wastewater, and trade corridor-related infrastructure.

Every potential project worth more than $100 million must undergo an evaluation to determine if it would be better delivered as a public private partnership, or P3, project.

Public private partnerships

P3 projects offer innovative ways to finance large public infrastructure projects during a time when much of North America’s infrastructure needs repair, and government budgets are increasingly strained.

A P3 infrastructure project is funded and operated through a joint effort of government and private business. Governments grant a right to companies to design, develop, build, operate, and maintain an infrastructure asset, often for decades. In exchange for assuming financial, technical and operational risk, the private businesses earn a fair rate of return on their investment.

Is Bird Construction set to take flight?

Long considered one of Canada’s leading companies for its strong returns on capital and shareholder equity, Bird Construction is also well regarded for delivering an annual profit for 20 consecutive years. It’s a leader in P3 delivery, with projects underway or complete in nearly half of Canadian provinces.

The oil and gas sector is an area where the P3 delivery model has frequently been employed to deliver infrastructure projects, and a market where Bird has competed successfully for many years. This expertise in now being leveraged to deliver a wide range of infrastructure projects across the county. And Bird’s well regarded ability to manage large, complex projects is particularly important as the P3 process requires the construction company pay interest on any schedule overruns.

Foolish bottom line
Though the Federal government has touted the significance of the New Building Canada Fund, the reality is that much of the funding for the program only becomes available near the later part of the 10-year program horizon. It will take some time for Bird, and its investors, to benefit from the $14 billion fund established to revitalize Canada’s infrastructure.

And with a trailing price-to-earnings ratio of 48.7, and a forward P/E ratio of 15.2, both significant premiums over their five year averages, now may not be the right time to initiative a new position in Bird’s stock. But with a dividend yield of 5.5%, this stock in one that should be on the watch-list of any income seeking investor.

Fool contributor Justin K Lacey has no positions in any of the stocks mentioned in this article.

More on Investing

middle-aged couple work together on laptop
Stocks for Beginners

The $109,000 TFSA Opportunity: How Do You Stack Up?

Learn about the benefits of the TFSA. Find out how to take advantage of the $109,000 contribution room available in…

Read more »

dividend growth for passive income
Metals and Mining Stocks

1 Top Growth Stock to Buy in March

First Quantum Minerals is one of the most compelling copper growth stocks on the TSX right now. Here's why it…

Read more »

Trans Alaska Pipeline with Autumn Colors
Dividend Stocks

Enbridge Stock: Buy Now or Wait for a Pullback?

Enbridge just hit a record high. Are more gains on the way?

Read more »

tsx today
Stock Market

TSX Today: What to Watch for in Stocks on Tuesday, March 31

The TSX ended slightly lower amid rising volatility, while today’s mixed commodity trends and geopolitical risks could keep sentiment cautious.

Read more »

man in bowtie poses with abacus
Dividend Stocks

How Much Canadians Typically Have in a TFSA by Age 55

The average 55-to-59-year-old's TFSA balance is a useful benchmark, but Loblaw shows how investing well can still move the needle.

Read more »

stocks climbing green bull market
Dividend Stocks

The Canadian Dividend Stock I’d Trust When Markets Get Choppy

Intact Financial (TSX:IFC) stock is the TSX dividend fortress that just keeps delivering

Read more »

dividends can compound over time
Dividend Stocks

3 Ultra-High-Yield Dividend Stocks I’m Still Buying

These three ultra-high yields look tempting, but each one pays you in a very different (and with a very different…

Read more »

Aerial view of a wind farm
Dividend Stocks

Maximum TFSA Impact: 2 TSX Stocks to Help Multiply Your Wealth

Want to get more out of your TFSA? These two TSX stocks could help you grow wealth steadily over time.

Read more »