The pandemic isn’t over and many businesses worry about a return to lockdowns due to the new, highly-transmissible COVID variant. Fortunately for investors, some companies are thriving or will continue to prosper in 2022 despite the challenging environment.
Two names in the industrial sector are the smartest buys right now. TFI International (TSX: TFII)(NYSE: TFII) and Toromont Industries (TSX: TIH) have been resilient for most of 2021. Furthermore, the dividend yields are modest but safe and sustainable.
Solid performer
TFI International is among the top performers on the TSX this year. As of December 17, 2021, the industrial stock (+109.91%) outperforms the red-hot energy sector (+67.79%) and the broader market (+18.96%) year to date. At $136.48 per share, the dividend yield is 1.02%.
The $12.82 billion transportation and logistics company boasts a diverse customer base in the U.S., Mexico, and Canada. Its wholly-owned operating companies (80+) provide a full complement of transportation and logistics services. Moreover, TFI’s vast e-commerce network covers more than 80 cities in North America.
Besides the diversified multiple geographies, industry verticals, and business segments, TFI is proud of its world-class assets and cutting-edge technology. The asset-light business model is also why the balance sheet is robust. It uses a balanced capital allocation approach to drive or unlock shareholder value.
Management’s growth strategy is to acquire well managed companies that can help expand reach, increase route density, and enhance TFI’s capability to serve a larger market. The earnings results after three quarters in 2021 reflect a thriving business. Its chairman, president, and CEO, Alain Bédard, said all of its business segments have surpassed their pre-pandemic performances in Q3 2021.
In the nine months ended September 30, 2021, TFI’s revenue and net income growths versus the same period in 2020 were 91% and 138.1%, respectively. According to Bédard, the financial performance in the coming quarters should improve vastly when revenues from newly acquired UPS Freight pour in. He adds that TFI will enter 2022 in a position of historic strength.
Serving essential industries
Toromont is well known in essential industries as the top provider of brand-name equipment and comprehensive product support. The $8.98 billion company caters to customers in the construction, infrastructure, manufacturing, mining, and road-building sectors. It derives revenue from two core business segments.
The Equipment Group consists of Caterpillar dealerships, one of the largest groups by revenue and geographic territory. IMCO, the second income contributor, is a market leader in designing, engineering, fabrication, and installing industrial & recreational refrigeration systems.
Scott J. Medhurst, Toromont’s president and CEO, said that despite operating in a very fluid, complex, and uncertain environment, the company delivered solid financial results. In the nine months ended September 30, 2021, revenues, operating income, and net earnings increased 18%, 33%, 37% respectively year over year.
Medhurst adds after Q3 2021, “Activity remained sound as demonstrated by new bookings and our current backlog levels.” However, he notes that production schedules and supply chains were challenged, and the restricted availability will result in delivery date extensions.
Toromont trades at $111.07 per share (+26.17% year to date) and pays a 1.26% dividend. The company went public in 1968 and has never missed a dividend payment after the IPO.
Quality investments
TFI and Toromont aren’t expensive at their current share prices. You gain a pair of quality stocks if you invest today.
