Canadian investors could have earned market-beating returns on Bird Construction (TSX: BDT) and Cascades (TSX: CAS) stock so far this year. The two top dividend stocks are on fire in 2023, as they deliver pleasant news to the market. One is a good turnaround story to read. The other has printed new 52-week highs lately, pays monthly dividends that yield 4.4%, and management expects wider earnings margins during the second half of this year. Let’s take a closer look.
Bird Construction: A monthly dividend stock on fire
Construction company stocks are cementing their place in investor portfolios this year, and Bird Construction is one of the best-performing monthly dividend stocks in Canada right now. The $536 million construction stock is on fire, as it prints new 52-week highs after delivering back-to-back earnings beats and reporting record revenues so far this year. Up 23.7% year to date, BDT stock has returned 46.1% in total returns over the past year, including an 11.6% gain during the past week.
Why is Bird Construction stock rising in 2023? The company is growing revenue at double-digit rates, widening its earnings margins, and winning new business. Second-quarter revenue surged by 19% year over year to $686.4 million. Adjusted earnings per share increased by 81.3% to $0.29 per share, and the company added almost $1 billion in new contract wins or extensions to its total backlog between April and June 2023, increasing its backlog to $3 billion.
Bird Construction is a lower-risk engineering and construction dividend stock to buy in 2023. It has limited exposure to fixed-price turnkey projects, which are troubling Aecon Group (TSX: ARE) right now after inflation rendered fixed-price projects unprofitable. The company is enjoying organic revenue growth, tucking in opportunistic acquisitions successfully, and expanding its operating margins this year.
Dividend investors earn a 4.3% dividend yield. The company’s balance sheet is fairly strong, and management expects further margin expansions during the second half of 2023. The dividend stock could sustain some positive momentum for longer. Shares remain fairly valued, given a price-to-earnings (P/E) multiple of 11.1, which compares favourably to an average industry P/E of 15.9.
Cascades: Earning more firepower to raise dividends
Tissue maker and packaging materials producer Cascades is a hot Canadian dividend stock that has sustained a positive stock price growth momentum so far in 2023. Cascades stock is up 50.8% year to date. Including quarterly dividends, early investors could have earned a 54% total return on CAS stock since January.
Why is Cascades stock rising in 2023? The company has made significant improvements in profitability, as it turns around its once-ailing Tissue Papers business, and it’s steadily growing revenue and earnings in 2023.
Cascades reported $1,168 million in second-quarter revenues — a steady 4.4% year-over-year growth. Net income more than doubled to $22 million from $10 million a year ago. Most noteworthy, the company’s quarterly adjusted earnings before interest, taxes, depreciation, and amortization (adjusted EBITDA) margin jumped from 8.1% a year ago to 12.1% by June this year.
Adjusted EBITDA is a good measure of a business’s earning power, regardless of how it is financed or structured. Cascades is earning much more per dollar of revenue than it used to 12 months ago. The company’s 2022-2024 strategic plan is executing well, and Cascades’s once-ailing Tissue Papers segment is earning money now.
Investors love good turnaround stories, and Cascades stock has given the market one.
The current Cascades stock quarterly dividend yields 3.75% annually. The company tripled its dividend over the past five years. Earnings growth helps secure the dividend payout and provides more room for the high dividend-growth stock to raise its dividend further.
