While no developed nation came out of the GreatRecession
unscathed, some did emerge in a far better position than other
major developed countries.
One of those is our neighbor to the north... Canada.
In fact, I think Canada is one of the single best places
investors can invest in order to diversify their portfolio and earn
compelling returns.
(It's easy to buy Canadian stocks -- most of them trade as
either American Depository Receipts (ADRs) or over-the-counter in
the United States.)
A number of factors have contributed to Canada's economic
resilience. First, natural resources -- including the production of
energy commodities, metals mining and forestry, which account for
nearly 12% of the country'sGDP .
While the collapse in prices for crude oil and most industrial
metals during the heart of the financial crisis hurt this segment
of theeconomy ,commodity prices rebounded quickly in 2010 and
2011.
And, unlike the United States, Canada's housingmarket didn't
collapse in 2008. In fact, modest income growth has continued to
power activity in this sector in recent months.
Canadian banks have generally been less aggressive lenders than
their U.S. counterparts, and Canadian regulators required banks to
hold more capital to support their loans at the dawn of the crisis
in 2007.
That means that as global credit conditions deteriorated,
Canadian banks were less vulnerable to mounting bad loans and
problem debts.
And Canadian companies also have a history of paying larger
dividends than their peers in the United States. The Toronto Stock
ExchangeIndex offers an averageyield of 3.1%, a full percentage
point higher than the 2.1% average for the U.S. S&P 500.
That makes the nation's equity markets a fertile hunting ground
for income-oriented investors.
There is one company, currently yielding 5%, that has been a
major beneficiary of Canada's strong housing and natural resources
economies...
Bird Construction (Toronto: BDT; OTC: BIRDF)
is a general contractor in Canada, focused on non-residential
construction, including industrial, institutional, commercial and
retail projects.
Bird has historically been a market leader in construction
projects related to Canada's energy industry and, in particular,
construction activity surrounding Alberta's oil sands.
As energy prices tumbled in late 2008 and early 2009, most of
the big Canadian energy producers, including
Suncor (
SU
)
and
Encana (
ECA
)
, slashed their capital spending budgets and delayed or canceled
planned production expansion projects.
In particular, profitably producing crude from the oil sands
region of Canada requires relatively high oil prices. It's
estimated that when prevailing prices fall much below $70 per
barrel, investment activity slows.
In December 2008, oil prices fell into the mid-$30s per barrel,
down from nearly $150 per barrel in the middle of 2008. Bird's
energy construction business went from boom to bust in a matter of
just a few months. But Bird's management team handled that historic
crisis well, beefing up the company's institutional business to
offset the decline in its energy-focused industrial group.
Institutional projects include the construction of schools,
government buildings, law enforcement training facilities and other
public works.
Just as in many other countries around the world, Canada stepped
up public works spending during the economic downturn to help
stimulate the economy, and Bird took advantage by bidding on many
of these profitable deals.
For the most part, these institutional projects are conducted as
public-private partnerships (
PPP
) where private companies share the risk and receive significant
support from the Canadian national or provincial governments.
In the most recentfiscal year , the institutional business unit
accounted for 58% of Bird's total revenues, compared with just 31%
for its industrial business, a unit that includes energy-related
projects.
Over the past three years, Bird has boosted its payout at an
11.3% annualized pace. And in April 2012, the company boosted its
monthly payout once again by 9% from C$0.055 per month to C$0.06
per month. At current prices, Bird yields roughly 5%.
Management has indicated that it will continue to bid on
government PPP contracts, but this market is expected to slow as
the government's stimulus efforts wind down.
Fortunately, the even more profitable industrial and energy
business is enjoying the beginnings of yet another rebound that
kicked off in the second half of 2011. In fact, in its annual
results released back in early March, Bird indicated that its oil
sands construction business is likely to move back to pre-2009
levels in 2012.
With Brent Crude oil prices continuing to hover above $105 per
barrel, and U.S. West Texas Intermediate around $90 per barrel,
activity in the oil sands region, where Bird is a major player,
could continue to benefit Bird.
Risks to Consider:
Investing in oil sands is a risky game, and a renewed
downturn in commodity prices in late 2012 could particularly hurt
the oil sands producers, which would also affect Bird.
Action to Take -->
With a long history of raising dividends each year, Bird
Construction rates a "buy" under C$15.50 on the Toronto exchange
and $15.50 for those buying the U.S.-traded over-the-countershares
.
P.S. --
If you're tired of earning sub-par yields on your hard-earned
money, you don't have to settle for U.S.Treasuries or stocks.
There's a whole universe of large, stable, high-dividend paying
international stocks available to investors. The problem is, most
regular investors don't know about them.
I pull back the curtain in this special report,
Forget Treasuries -- Buy These 12% Yields Instead
.
-- Paul Tracy
Paul Tracy does not personally hold positions in any securities
mentioned in this article. StreetAuthority LLC does not hold
positions in any securities mentioned in this article.