DBM:CC - This Canadian Construction Stock Could Leave the S&P 500 in the Dust
2025-02-27 19:00:00 ET
Canada’s construction sector is in recovery mode in 2025, although growth as well as risk could be ahead. The positive outlook also stems from the easing pressure on new projects due to declining interest rates and reduced inflation. Add the gradual recovery in the residential market as a contributing factor.
Bill Ferreira, the Executive Director of BuildForce Canada, said the improved economic environment sets the stage for increased investment across all segments of the construction business, from homebuilding and the industrial sector to engineering infrastructure and others.
On the investment side, Doman Building Materials Group ( TSX:DBM ) should be on your radar. This Canadian construction stock could leave the S&P 500 in the dust. The signs are there, because in the last six months, DBM has gained 19.5%-plus compared to 12.5%-plus for the S&P 500 Index .
Dividend gem
Doman Building Materials is not a homebuilder but a premier building supply provider in North America. Its products include construction lumber and next-generation building materials. The $666.9 million Vancouver-based company is expanding its presence across the border.
On January 26, 2025, Matt McKellar, an analyst at RBC Capital, maintained a buy rating. His price target is $11, or a 44%-plus potential upside. Buy DBM now before the stock price skyrockets. At only $7.64 per share, you can partake in the hefty 8.3% dividend.
Doman Building Materials pays quarterly dividends; the Q4 2024 dividend was the 59th consecutive quarterly payment (14.75 years). Assuming you invest $13,648.46 (1,862 shares), your money will generate $250 in quarterly passive income .
As a vertically integrated global building material group, Doman operates distribution centres, wood treatment plants (21 in Dallas, Texas), specialty sawmills, planing mills, post-peeling facilities, and private timberlands. The distinctive vertical model also enables efficient management of the complete supply chain while offering high-quality products at highly competitive prices.
Most recent quarterly results
In Q3 2024 (three months ending September 30, 2024), revenue increased 3% to $633.1 million, while net earnings declined 31.2% year-over-year to $14.6 million. The quarterly results reflect the weak North American market. Moreover, the cooling consumer demand put downward pressure on materials pricing. Doman’s gross margins took a hit as a result.
Doman manufactures and distributes construction materials product, but is exposed to pricing volatility. However, increasing prices translate to higher sales and increased margins. Management expects demand for the products to remain resilient in the long run, aided by strong fundamentals in end markets.
The fully integrated national distributor group will focus on cash flow, including optimizing working capital, reducing operating costs, minimizing capital expenditures, and assessing the dividend policy to maximize shareholder value.
Assurance to stakeholders
Many businesses see US President Donald Trump’s proposed tariff on Canadian imports as massive headwinds. However, Amar S. Doman, Chairman and CEO of Doman Building Materials Group, said, “Given we run two self-sustaining businesses on both sides of the border, with neither relying materially on the other for products, we don’t anticipate an impact to our business based on what has been proposed to date.”
The post This Canadian Construction Stock Could Leave the S&P 500 in the Dust appeared first on The Motley Fool Canada .
Fool contributor Christopher Liew has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy .
2025