Infrastructure is a vital sector in advanced and emerging economies. In Canada, this sector’s projected compound annual growth rate (CAGR) from 2023 to 2028 is 4%. The federal government, through the Canada Infrastructure Program, plans to spend millions to complete many infrastructure projects.
On the TSX, SNC-Lavalin Group Inc. (TSX:SNC), Stella-Jones (TSX: SJ), and Brookfield Infrastructure Partners (TSX: BIP.UN) are solid infrastructure investment options. Thus far in 2023, all three stocks have market-beating returns.
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Record backlog growth
SNC-Lavalin is flying high due to several contract awards and deals in the pipeline. At $33.34 per share, the year-to-date gain is nearly 40%, not to mention a 0.24% dividend yield. The $5.9 billion project management company operates in the engineering and construction industry and offers integrated professional services.
The recent awards include a four-year US$10 million contract by the Texas Department of Transportation and two-year Project Management Consultancy services contract for the Ministry of Culture in Saudi Arabia. At home, SNC-Lavalin partners with the Toronto Transit Commission in an enterprise asset management program.
According to its President and CEO, Ian L. Edwards, SNC-Lavalin is implementing a “pivoting to growth” strategy. Management also welcomes the increasing infrastructure investments by governments and commercial clients.
In Q1 2022, revenue and net income from continuing operations rose 14.5% year over year to $28.4 million. As of March 31, 2023, SNC-Lavalin’s services backlog is a record-high $12.1 billion. Edwards said the backlog growth demonstrates business resiliency.
Unique leadership position
Utilities, telecommunications, and railways are segments in the infrastructure market. In the lumber and wood production industry, Stella-Jones offers railway ties and timbers for commercial railroad operators. The $3.9 billion producer of pressure-treated wood products also provides wood utility poles for electrical utilities and telecommunication companies.
If you invest today, the share price is $66.52 (+38.3% year to date), while the dividend offer is 1.37% (the payout ratio is 19.6%). Stella-Jones had a record year in 2022 and an outstanding start to 2023. Moreover, the business outlook is exceedingly bright.
Because of Stella-Jones’ favourable position, management raised its 2025 sales target to almost 20% above 2022 sales. It targets a 16% EBITDA margin from 2023 to 2025 due to the accelerating demand for its higher-margin utility poles business. President and CEO, Eric Vachon, said Stella-Jones enjoys a unique leadership position in the business.
Resilient in all market conditions
Brookfield Infrastructure’s CEO, Sam Pollock, said, “Our diversified portfolio of high-quality infrastructure assets is well positioned to deliver resilient results during all market conditions.” The $22.2 billion company owns and operates utilities, transport, midstream, and data businesses in North and South America, Europe, and the Asia Pacific.
In Q1 2023, management reported robust 9% organic growth, although net income dropped to US$23 million from US$70 million in Q1 2022. Nonetheless, successful capital deployment initiatives ensure future growth. Market analysts forecast the current share price of $48.40 (+18% year to date) to appreciate by 24.4% to $60.22 in one year. BIP.UN pays an attractive 4.21% dividend.
Significant growth
Infrastructure needs to continue to rise even in advanced economies. The Canadian government expects significant investments and project development in critical commercial and manufacturing construction projects in the near term.
