Canadian investors can leverage the benefits offered by the Tax-Free Savings Account (TFSA) to transform a registered account into a cash-pumping machine. Any returns generated from qualified investments in a TFSA are exempt from Canada Revenue Agency taxes, making it an ideal account to hold dividend stocks.
In this article, I have identified one such TSX stock that is positioned to grow its dividends at a steady pace over the next few years. Let’s see why a TFSA investor should invest $10,000 in this Canadian dividend stock today.
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Is this TSX dividend stock a good buy?
Valued at a market cap of $1.6 billion, Bird Construction (TSX: BDT) is a Canadian construction company that provides services across industrial, building, and infrastructure markets. It constructs manufacturing facilities, institutional buildings, and civil infrastructure projects, and offers electrical services.
Bird serves multiple sectors, including oil and gas, renewable energy, healthcare, education, and government, providing a full range of services from site preparation to complex industrial construction.
Bird Construction posted mixed second-quarter results but made a strategic acquisition that strengthens its infrastructure capabilities. Its gross margin rose to 10.6% in Q2, up from 8.6% in the year-ago period, while the adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) margin improved from 5.3% to 6.5%.
Revenue fell marginally to $850.8 million due to project delays caused by economic uncertainty. Many clients postponed work as they wait for clarity on trade policies and tariffs, and the delays impacted Bird’s private industrial customers the most.
Bird Construction ended Q2 with a record backlog of $4.6 billion, an increase of 36% year over year. It secured nearly $1.2 billion in new contracts in Q2, and the backlog includes higher margin projects compared to last year’s contracts.
Growth acquisition
The company announced a significant acquisition of Fraser River Pile & Dredge for $82.3 million. FRPD, a 114-year-old entity, brings marine construction, land foundation, and dredging capabilities, while providing Bird with access to specialized equipment. Additionally, FRPD holds an exclusive 20-year contract to maintain the Fraser River’s navigation channel.
This deal aligns with Bird’s strategy of acquiring companies with specialized skills and strong margins. FRPD generates about $160 million in annual revenue and $20 million in EBITDA. The acquisition is expected to boost Bird’s earnings per share by 7% on a full-year basis.
FRPD opens new growth opportunities for Bird as the latter can now bid on larger marine infrastructure projects. Canada is investing heavily in port upgrades and Arctic facilities, and FRPD has experience in these markets from past projects in Churchill, Montreal, and Hamilton.
Is this TSX stock undervalued?
Bird expects revenue growth in the second half of 2025 compared to the same period last year. However, the pace will be slower until trade uncertainty is resolved. Moreover, the construction company maintains its 2027 target of 8% EBITDA margins, above the current margin of 6.5%.
Analysts forecast Bird Construction’s revenue to increase from $3.4 billion in 2024 to $4.4 billion in 2027. In this period, adjusted earnings are forecast to expand from $2.04 per share to $3.53 per share.
A widening earnings base should enable the TSX stock to increase its annual dividend from $0.59 per share in 2024 to $1.12 per share in 2027. This implies that the effective yield for BDT stock investors could rise to 3.8% in 2027, up from 2.9% in 2024.
If the TSX dividend stock is priced at 15 times forward earnings, it could return more than 90% over the next 18 months, making it a top TFSA investment right now.
