Canadians with long-term investment horizons should consider investing in infrastructure stocks for portfolio diversification in 2025. The top four choices on the TSX today can provide stable returns, steady income streams, and inflation protection.
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Long-term progressive projects
Aecon Group (TSX: ARE) is a lucrative option because of the favourable demand environment in Canada’s infrastructure development industry. The $1.49 billion company obtains contracts in private and public infrastructure sectors, although seasonal patterns affect operating results.
The $5.98 billion backlog in 2024 should support Aecon’s future growth potential. Notably, the backlog doesn’t include long-term progressive projects that will move into the construction phase in 2025 and 2026 through progressive design-build or alliance models.
Despite the measly $22.6 million operating profit after three quarters in 2024, Aecon maintains a positive outlook. The company expects revenue growth in 2025 and over the next few years as it focuses on improved profitability and margin predictability. At $23.94 per share, the trailing one-year price return is +70.96%. ARE pays a decent 3.17% dividend.
Industry leader
Badger Infrastructure Solutions (TSX: BDGI), a $1.37 billion company, operates in the engineering and construction industry. At $39.93 per share, current investors enjoy an 11.29% year-to-date gain on top of the modest 1.8% dividend yield. Its Badger Hydrovac excavation system provides non-destructive excavating and related services in North America.
Strong demand tailwinds and under-penetration of non-destructive excavation present significant long-term growth opportunities. Badger’s diverse market and customer base lend competitive MOAT. Total revenue after three quarters in 2024 grew 9% year over year to US$557.7 million.
“We remain focused on executing our pricing, sales and utilization strategies to continue driving revenue growth and profitability, further establishing Badger as the industry leader in non-destructive excavation,” said Rob Blackadar, president and chief executive officer (CEO) of Badger.
Building blocks
Enerflex (TSX: EFX) was among the high-flyers in the energy sector in 2024 (+136.5% overall return). The current share price of $13.49 is 103.62% higher than a year ago. Investors also earn dividend income (1.33% yield) from this energy stock.
The $1.67 billion company operates in the Oil & Gas Equipment & Services industry. Enerflex’s product offerings, which are all building blocks in the energy sector, include gas processing, cryogenic, electric power, treated water, and compression. The scale is global, and relationships with business partners are long term.
In the third quarter (Q3) of 2024, net earnings and free cash flow jumped 60% and 169% to $30 million and $78 million compared to Q3 2023. With the steady demand across its business lines, Enerflex will continue to focus on enhancing the profitability of core operations while streamlining its geographic footprint.
Dividend Aristocrat
Brookfield Infrastructure Partners (TSX: BIP.UN) owns and operates critical global infrastructure networks. The assets of this $21.96 billion company generate stable cash flows, high margins and strong growth prospects. In 2024, revenue and net income increased 17.3% and 16.2% year over year to US$21 million and US$1.68 million versus 2023.
Management’s dividend growth guidance is 5% to 9% annually. On January 30, 2025, the board approved a 6% hike, the 16th consecutive year of dividend increases. If you invest today, this infrastructure stock trades at $47.56 per share.
Great choices
Brookfield Infrastructure, a large-cap stock, is a pure dividend play. However, small-cap stocks Aecon, Badger, and Enerflex have visible long-growth runways and are excellent for growth and income investors.
