Building Wealth: The Construction Companies Cementing Their Place in the Market

Canadian construction stocks including SNC-Lavalin Group stock are pulling off surprising performances in 2023. Two names could pay up to 5.9% in dividend yield.

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Good money is being made in the construction industry, despite a widely reported weakness in North American real estate markets. Canadian construction companies reported strong revenue and earnings growth numbers for the first quarter of 2023. Some announced record revenue backlogs. They continue to win new contracts, and they are literally building wealth.

If your portfolio doesn’t have exposure to the construction sector yet, this could be the time to further diversify into builders cementing their place in the stock market. SNC-Lavalin Group (TSX:SNC) stock, Aecon Group (TSX:ARE) stock, and Bird Construction (TSX:BDT) are construction stocks to consider for wealth building. Two of them fit perfectly in a dividend investing strategy too. Let’s take a closer look.

SNC-Lavalin Group

SNC-Lavalin Group is a $5.8 billion construction and project management stock that affords investors diversified exposure to growing construction industry profits. SNC stock price surged by 12% in a day after first-quarter (Q1) 2023 earnings in May this year, and it packs more upside potential.

SNC stock surged in response to an impressive set of Q1 revenue, earnings, and record backlog numbers that exceeded market expectations.

Q1 revenue of $2 billion was 7.2% higher year over year, and net income from continuing operations surged by 14.5% to $28.4 million. Interestingly, the company’s services backlog reached a record high of $12.1 billion by March 31 this year. The company announced four more contract wins after Q1 earnings.

The company is growing its professional services and project management business successfully, as it helps the world transition to a low-carbon future.

SNC stock is up 37% year to date.

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Aecon Group

The Aecon Group is another Canadian construction stock that’s cementing its place in investor portfolios. The $772 million company reported a 12% surge in Q1 2023 revenue to $1.1 billion. “The North American construction market continues to be resilient” in the sectors that Aecon serves, Chief Executive Officer Jean-Louis Servranckx revealed in a recent Q1 earnings release.

Aecon Group’s strategic focus on projects and concessions linked to decarbonization, sustainability, and energy transition is paying off. Its revenue streams should remain flooded, as billions find their way into climate-friendly and “greening” projects.

The company had a strong revenue backlog of $6 billion in March this year, and its joint venture recently won a $1.3 billion contract from the Bruce Nuclear Generation Station in Ontario.

What’s more? Aecon’s revenue backlog could be much higher. The company belongs to two consortiums that won two large Ontario projects: a 25-year GO Expansion Corridor Works contract, and the Scarborough Subway Extensions, Rail Systems Project. The two opportunities don’t feature in Aecon’s current backlog yet.

The construction stock could post impressive revenue and earnings-growth numbers this year and shares may go higher, to investors’ delight. Aecon also pays a quarterly dividend that yields a juicy 5.9% annually to boost your passive income.

Bird Construction

Bird Construction is a profitable $436 million construction business that generates a 13.5% return on equity (ROE). It has been playing with cement and building structures for over a hundred years, and the company has created strong customer connections and built a recurring revenue portfolio.

Bird Construction reported a record revenue backlog of $2.7 billion and had a Pending Backlog of $3 billion by March 31, 2023, after adding $594.5 million and $859.6 million to its backlog, respectively.

Revenue is growing nicely at Bird Construction. The company reported a respectable 12.8% year-over-year growth in Q1 revenues to $536.5 million. Interestingly, the company added more contracts to its revenue backlog ($594.5 million) than it completed during the first three months of 2023.

Further, the company announced four new contract wins subsequent to the first-quarter end. New revenue-producing contracts include a $300 million Master Service Agreement with three strategic clients and heavy civil works at a large mining concern in Quebec. The business’s revenue and cash flow growth story is promising for long-term-oriented investors.

Most noteworthy, Bird Construction stock investors receive a monthly dividend of $0.036 per share that yields 5.3% annually. Bird raised its dividend by 9% for 2023. Investors can add BRD stock to their personal portfolios to boost their recurring passive income.

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 Brian Paradza has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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