A Canadian Dividend Pick Down 25%: A “Forever” Hold

Valued at a market cap of $11 billion, Stantec (TSX:STN) is an Edmonton-based engineering and infrastructure consulting giant. The TSX stock is down 40% from its all-time high, which has raised the dividend yield to 1% in June 2026. Despite the ongoing pullback, the Canadian dividend stock has more than tripled investor returns over the past decade.

I think Stantec remains a “forever” hold for patient investors willing to look past short-term noise.

The bull case of investing in this TSX dividend stock

Stantec is forecast to increase sales from $6.94 billion in 2025 to $7.94 billion in 2030. In this period, free cash flow is projected to improve from $641 million to $854 million.

If the TSX stock is priced at 15 times forward FCF, it could deliver more than 30% returns over the next four years.

Further, with a dividend payout ratio of just 20%, it has enough room to raise the dividend, reinvest in growth, and strengthen the balance sheet.

Notably, Stantec has increased its annual dividend from $0.30 per share in 2012 to $0.98 per share in 2026.

Stantec helps governments and private clients plan, design, and build the world around them. These projects include water systems, transportation networks, climate resilience projects, and energy infrastructure.

In Q1, Stantec grew net revenue to $1.7 billion, up just over 9% compared to the same quarter last year. Adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) rose nearly 14% year over year, while earnings grew by 15%. It ended Q1 with an EBITDA margin of 16.9%, a 70-basis-point improvement.

At the end of Q1, Stantec’s contract backlog hit a record $9 billion, representing roughly 13 months of work. That backlog grew by more than 13% year over year, indicating that demand for its services is not slowing.

CEO Gord Johnston reaffirmed full-year guidance on the call, projecting net revenue growth of 8.5% to 11.5%, and adjusted EPS growth of 15% to 18%.

There are several key drivers for this TSX stock.

• Water infrastructure is booming. In the UK, the AMP8 program (the regulatory cycle that is driving billions into water system upgrades) is ramping up quickly. Stantec is one of the primary design partners for Scottish Water and is actively hiring in the UK and India to meet demand. Water organic growth hit 15% in the Global segment in Q1.
• In Canada, the federal government’s defence review named Stantec among its top 100 defence companies for 2026. The company has already completed work on 16 national defence bases and is pursuing Arctic infrastructure projects, including the Grays Bay Road and port project. Johnston called out Canada’s defence industrial strategy, the Arctic Infrastructure Plan, and the Build Communities Strong Fund as directional positives on the call.
• In the US, Stantec is working with five of the top hyperscalers on data centre projects totalling well over one gigawatt of capacity. The company also recently secured a design contract for a multibillion-dollar semiconductor manufacturing facility in Idaho.

The Foolish takeaway

Stantec is a business with a 70-year track record, a record backlog, expanding margins, growing dividends, and a diversified client base spanning governments, utilities, and major private-sector operators across three continents.

At current prices, investors are getting all of that at a significant discount to where the stock traded just 18 months ago.

CFO Vito Culmone acknowledged on the Q1 call that the current valuation gap is becoming “increasingly hard to ignore,” signalling the company may start buying back its own shares. That is management putting its own balance sheet to work at what it sees as a bargain price.

The post A Canadian Dividend Pick Down 25%: A “Forever” Hold appeared first on The Motley Fool Canada.

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More reading

• 3 TSX Stocks That Could Benefit From Surging Data Centre Demand
• A Canadian Dividend Stock Down 35% to Buy and Hold for Retirement
• The AI Boom Needs Data Centres: 2 TSX Stocks to Watch Closely
• Earnings Season: 3 Canadian Stocks That Could Pop on Results

Fool contributor Aditya Raghunath has no position in any of the stocks mentioned. The Motley Fool recommends Stantec. The Motley Fool has a disclosure policy.