Military spending should boost MDA

Prime Minister Mark Carney is undertaking Canada’s biggest military buildup since the Second World War to meet pressure from Donald Trump and to bolster our commitment to NATO.

The pledge is to raise defence-related spending to the equivalent of 5% of Canada’s gross domestic product by 2035, a move that will triple annual spending within 10 years to about $150 billion a year.

The measures are aimed at two areas. One is core military spending, which is to be equivalent to 3.5 per cent of GDP. The other is defense-related infrastructure spending such as bridges, ports, and roads, as well as internet security. That will equal 1.5%  of GDP.

The government would like to keep as much as possible of that spending in Canada to reduce reliance on US defense companies and nurture domestic suppliers. For investors, that means opportunity for companies that already supply the Department of National Defence (DND) and can expect that portion of their business to grow.

Here is a Canadian company that stands to benefit over time.

MDA Space (TSX: MDA) Recent close $41.81

Background: MDA is based in Brampton, Ont. and was formerly known as MacDonald, Dettwiler and Associates. It was founded in 1969 in Vancouver and became a leader in space robotics where its signature product was the Canadarm.

MDA went through multiple ownership changes before returning to private Canadian control in 2020 and then going public in 2021.

It employs 3,000 people across its three business areas: Geo intelligence, Robotics & Space Operations, and Satellite Systems.

The company has operations in the US and UK. The majority of its revenues come from commercial, military, and international space contracts.

MDA has a long-standing relationship with Canada’s Department of National Defence where it is focused on space-based surveillance and intelligence systems. It helps support and maintain advanced satellite systems, offering data analytics and AI-driven intelligence tools.

Performance: The shares are 42% higher year-to-date at the current price and 224% higher in the past 12 months.

Recent developments: In its first quarter results released in May, MDA’s revenues hit $351 million, up 68% from a year earlier. Net income more than doubled to $32.9 million, or $0.26 per share. Full year 2024 revenue was $1.08 billion, a 34% increase. Adjusted net income was $111 million, up 13%. Its 2025 outlook sees 45% growth to revenues of between $1.5 and $1.65 billion. 

One of MDA’s key collaborations is to support Canada’s  RADARSAT-2 systems. These systems monitor ship traffic across Canada’s Arctic, Atlantic, and Pacific coasts and are crucial for maritime awareness and national security. 

MDA has multiple contracts under the Defence Innovation Research Program (DIRP) aimed at integrating new technologies into DND operations. These include enhancing maritime surveillance using infrared satellite data. Another procedure is using cameras, radar, and heat and infrared detectors to spot changes in landscapes over time. This helps capture such things as new buildings or roads, natural changes like landslides or flooding, or unusual human activity in remote areas.

Dividend: The company does not pay a dividend and does not plan to do so in the short term.

While higher risk, MDA stands to benefit from the increase in Canadian and NATO defence spending.

This article appeared in a recent issue of the Internet Wealth Builder.  For information on how to reprint this article please view this page.