The improving outlook for cyclical commodity prices is prompting mining firms to order more equipment from Finning. The company is also benefiting as governments spend more on infrastructure projects. Those higher orders will fuel profits—and your dividends.
Recent customer orders include construction equipment intended for a new gold mine in British Columbia.
Meanwhile, the stock trades at just 10.7 times the company’s 2023 earnings forecast.
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FINNING INTERNATIONAL INC. (Toronto symbol FTT; www.finning.com) sells and services Caterpillar-brand heavy equipment in Western Canada, South America, the U.K. and Ireland. Its main customers are in the oil and gas, mining, forestry products, and construction industries.
The company continues to benefit from the re-opening of the world’s economies and increased demand for its equipment and services.
For example, the company finalized an order for excavating equipment and trucks from Artemis Gold Inc. (Toronto Venture Exchange symbol ARTG). Artemis will use this equipment for the construction of the first phase of its Blackwater gold mine project in central B.C.
The entire order is worth $134 million. The company expects to begin delivering this equipment in late 2023.
The contract is equal to just 1% of Finning’s 2022 revenue of $9.28 billion. However, it’s likely Artemis will buy more equipment as it adds additional phases to the Blackwater mine. That should also generate more demand for Finning’s repair and maintenance services.
Value Stocks: Rising revenues and backlog point to a strong future for Finning
Meanwhile, revenue in the three months ended March 31, 2023, gained 23.5%, to $2.14 billion from $1.74 billion a year earlier. Per-share earnings before unusual items jumped 50.8%, to $0.89 from $0.59.
Finning ended the quarter with a record equipment backlog of $2.7 billion, up 6% from the end of 2022.
Thanks to that strong backlog, the company will raise your quarterly dividend by 5.9%. Starting with the June 2023 payment, investors will receive $0.25 a share instead of $0.236. The new annual rate of $1.00 yields 2.5%. Finning has now increased the annual dividend each year for the past 22 years.
What’s more, your dividend has increased an average of 4.6% annually over the last 5 years. Finning’s TSI Dividend Sustainability Rating is Above Average.
The stock trades at a low 10.7 times the $3.72 a share that the company should earn in 2023.
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