SNC-Lavalin Group Inc. (TSX:SNC) is a giant in the field of engineering, construction, and procurement management. It’s also a stable dividend payer, and its share price is both affordable and reasonably valued. If you hadn’t thought of adding construction stocks to your dividend portfolio, perhaps now is the right time.
Let’s crunch the numbers
The share price is a little overvalued in terms of its future cash flow value. While this means that there’s less opportunity to buy low and sell high, you’re looking at a difference of only a few cents per share, so buy it, stick in in your dividend portfolio, and forget about it. It’s important to note that SNC stock is not overvalued in general – it’s actually priced quite accurately for both its sector and its price relative to the TSX.
Moving on, we can see that its five-year beta of 0.78 means that SNC is nicely insulated against market volatility, beating the already-sturdy Canadian construction industry beta of 0.91.
How about SNC’s fundamentals? Even with its higher price, SNC is good value compared to the industry average with a matched PE of 26.7 times earnings. If that seems a little high, bear in mind that the S&P 500 Index’s PE (to use an obvious example) has been over 20 for the last three years. SNC’s PEG is even better, at 0.8 times earnings, thus indicating healthy growth ahead. Its price-to-book ratio is looking good, too, at just 2 times earnings. All round, SNC’s numbers are pretty exciting.
Big enough for you?
SNC’s assets are diversified and cover just about every kind of building project you can imagine. Based in Montreal, SNC in involved with projects around the world in oil, gas, renewables, water, environment, mining and metalworks, and all sorts of infrastructure. In terms of engineering, construction, and procurement management, SNC can consult, design, engineer, construct, operate and maintain projects. That’s right – it’s big.
At a glance, SNC stock beats out its six closest competitors on the TSX. In terms of health, dividend yield, future prospects, past performance, and share price value, SNC is a Canadian capital goods winner. It holds very little debt and is more than able to cover it. But here’s the real draw of this stock: it’s currently paying a 1.97% dividend yield, making SNC perfect for investors looking for an established stock to add to their dividend portfolio.
If you’re looking for a stock to add to your TFSA and leave there, SNC is your guy. It’s perfect for your RRSP, too, so buy it and hold it for a steady income in your retirement portfolio.
The bottom line
This is a high-powered dividend stock that does pretty much everything you want it to. It’s healthy and has reasonable growth, pays a good dividend, and has rock-solid assets with a very sturdy business model. With an expected 34% increase in annual growth, SNC is well-placed to profit no matter what happens in the global economy. In short, if you’re looking for a trade-proof, recession-proof dividend superstar, you may have just found it.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.
Fool contributor Victoria Hetherington has no position in any of the stocks mentioned.