I Wouldn’t Touch This Stock With a 10-Foot Pole: Here’s What I’d Buy Instead

AtkinsRéalis (TSX:ATRL), formerly known as SNC Lavalin, is awash with ethical issues.

| More on:
Bad apple with good apples

Image source: Getty Images

I’m a pretty open-minded person. I have very flexible beliefs — about stocks as well as politics, music, and pretty much everything else. However, there are some stocks that I would not touch — not even with a 10-foot pole. Whether due to a reputation for fraud, low-quality financial statements, or just a prolonged lack of profits, these stocks raise too many red flags to be worth buying. In this article, I’ll explore one such stock that I wouldn’t even consider investing in — and what I’d buy instead.

SNC Lavalin/AtkinsRéalis

AtkinsRéalis (TSX:ATRL), previously known as “SNC Lavalin,” is a Canadian engineering and construction contractor. It builds and designs things like bridges, mine shafts, buildings, and even whole cities! In these projects, it works with large clients, such as governments and major corporations. The massive size of its clients nearly guarantees that AtkinsRéalis has a lot of money coming in — at least, most of the time.

Enormous ethical issues

The reason I would not touch AtkinsRéalis with a 10-foot pole is because the company suffers from massive governance issues. It was accused of bribing the government of India to get an enormous contract in that country. Then the company bribed a Federal Minister to secure a contract for Montreal’s Jacques Cartier Bridge. Later, it was accused of bribing several officials, including Federal Bridge Corporation chief executive officer Michel Fournier, who accepted $2.35 million in bribes related to the construction of the Jacques Cartier bridge.

By far, the biggest Bribery scandal AtkinsRéalis ever got caught up in was the SNC Lavalin affair. This affair involved the company bribing Libyan officials in order to win contracts in that company. That happened in 2011 but didn’t come into public view until 2019, when Prime Minister Justin Trudeau was accused of pressuring one of his ministers, Jody Wilson-Raybould, to not publicly disclose information about the bribes to the public. Wilson-Raybould followed Trudeau’s orders but later said that she felt pressured to do so. The company ultimately had to pay $280 million in fines related to the initial bribing of Libyan officials. No charges were ever laid concerning the subsequent political scandal in Canada.

Business not doing as well as it looks

AtkinsRéalis stock has risen dramatically this year, gaining 64% in the last 12 months. One of the main reasons it’s up so much is because it’s growing rapidly. In the trailing 12-month period, its revenue grew 8.7%, and its adjusted earnings grew 160%. It looks impressive, but there were other metrics that weren’t so good.

For example, GAAP (generally accepted accounting principles) earnings per share declined 58%. Also, the recent, better results come only after an awful series of years for the company. In 2019, the company made $2.4 billion in earnings; then in 2020, due to reputation hits stemming from the SNC-Lavalin affair, the company lost money. In subsequent years, it made a bit of profit, but not much. It’s been disappointing.

What I’d buy instead

Although I’d never buy AtkinsRéalis stock, I think its industry — infrastructure — is worth investing in. It’s for that reason that I hold a bit of my portfolio in Brookfield (TSX:BN) stock.

Brookfield is an asset manager that runs and invests in a number of different infrastructure funds. These funds have purchased some incredible assets, such as the world’s biggest nuclear energy company, Westinghouse, and a number of shipping and transportation companies. These assets are of high quality and are essential to building a green future, so it should come as no surprise that Brookfield is investing in them heavily–and paying dividends to its shareholders all along the way.

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 Andrew Button has positions in Brookfield. The Motley Fool recommends Brookfield and Brookfield Corporation. The Motley Fool has a disclosure policy.

More on Dividend Stocks

grow dividends
Dividend Stocks

2 Dividend Stocks to Use as Building Blocks for Lasting Wealth

Dividend stocks that are raising their dividends over time could create lasting wealth for investors. Here are a couple of…

Read more »

Glass piggy bank
Dividend Stocks

New Investors: How to Make the RRSP Work for You Now and Not Just in Retirement

The RRSP can work for you in retirement, but it can also bring huge benefits right now for investors looking…

Read more »

Senior couple at the lake having a picnic
Dividend Stocks

Retirees: 2 High-Yielding Dividend Stocks to Buy Today

These TSX dividend-paying stocks can be a retiree’s best friend in their self-directed portfolios for additional income in retirement.

Read more »

money while you sleep
Dividend Stocks

2 Stable Stocks for Sleep-Better Investing

Boasting rock-solid underlying businesses and great financials, these two stable stocks can be perfect holdings for your portfolio.

Read more »

Dividend Stocks

2 Dividend Stocks to Double Up on Right Now

After their recent declines, these two Canadian dividend stocks look even more attractive to buy for the long term.

Read more »

edit Colleagues chat over ketchup chips
Dividend Stocks

3 Common Investing Mistakes Almost Every Investor Makes

New investors, don't fall into these lesser-known mistakes many make over and over again! Instead, choose this investment for growth.

Read more »

Target. Stand out from the crowd
Dividend Stocks

1 Dividend Stock Down 15% to Buy Right Now

This top TSX stock has increased the dividend annually for five decades.

Read more »

Gas pipelines
Dividend Stocks

TFSA Passive Income: Is Enbridge Stock a Buy, Sell, or Hold?

Enbridge now offers a yield near 8%. Is the dividend safe?

Read more »