Q: I bought Aecon at $10.78 last year when the price dropped, offering an attractive dividend yield of almost 7%. I purchased it solely for its dividend, as part of my dividend portfolio, and did not expect much in terms of growth. Unexpectedly, to my surprise, it has become the best-performing stock in my portfolio. With the recent dividend increase, the yield now surpasses 7%. Historically, this stock has been quite volatile, with performance fluctuating. My question is: should I hold onto this dividend stock and overlook the 163% capital gain, or consider selling it and reinvesting in other dividend stocks? What is the potential here? If it reverts to its historical performance, would it be better to sell and buy other dividend stocks? Thank you for your insight.
5i Research Answer:
ARE has seen some price swings with prior issues of legacy contracts and cost overruns on projects. The general sentiment over the last few quarters is that 'the worst is over' and most recent quarterly results pointed to this. Revenue growth was positive and the company still has a large backlog of $6B. Management seemed quite positive citing that ARE is positioned for revenue growht in 2025 and years onward. TD's analyst upgraded it to a buy yesterday on these positive results and lowered risks from the legacy contracts. While we are skeptical with this name given how volatile it has been in the past, we think holding it could be worth at least holding for the short term to see if the positive sentiment continues to materialize.