In the interest of diversifying both my portfolio, and effectively, my dividend income stream, I’ve been looking for stocks in sectors which I’m very underrepresented in. One such area is the Industrials sector, with my only stock being SNC-Lavalin, purchased a year ago.
As many of you know, I adore high-yielding monthly dividend-paying stocks – that’s a big part of how I was able to increase my dividends so fast in 2016. Of course, investors will say that a high yield is usually an indication that a company may be on hard times due to a depressed stock price, but to guard against this we look at the payout ratio to understand that the dividend is safe and continue growing. A lot of other investors will tell one not to focus on stocks just because they pay dividends monthly, but many of these companies are attractive in all other metrics that the fact that they pay dividends monthly, and can thus compound better, is simply a plus and a large motivator.
One such industrial stock with a high dividend yield of 6.7%, and a very manageable payout ratio and monthly distributions, is Exchange Income Corporation (EIF.TO).
Profile
Exchange Income Corp. is a diversified, acquisition-oriented corporation which focuses in aviation services and equipment, and manufacturing. Much like my largest position, Alaris Royalty Corp., EIF is interested in investing in profitable, well-established companies which allows the corporation to deliver stable and increasing dividends while increasing shareholder value wherever possible.
EIF has a very well and narrowly defined acquisition strategy to purchase the correct companies that can be or are income generating vehicles.
Wide Range of Diversification
Exchange Income Corp. is an incredibly well-diversified aerospace and manufacturing company, both in terms of revenue and geographical diversification. Due to this diversification the company is able to withstand a slew of different market conditions.
Increasing Dividends Since 2004
Exchange Income Corp. has been paying increased dividends since 2004 and has secured it’s position as a fantastic dividend growth stock trading on the TSX. EIF’s dividend payment has gone from $1.08 to $1.92 from 2004 to 2015. Throughout 2009 to 2010, however, EIF kept it’s dividend constant at $1.56. This does not bother me at all, considering the Big Five Banks had done the exact same thing and many other stocks actually cut their dividends. From 2004 to 2015, the dividend has been increased by a total of 77.78%. According to longrundata, EIF has a 5-year dividend growth rate of 3.07% and 10-year dividend growth rate of 7.63%. Considering EIF currently yields 6.7%, these growth rates are quite OK.
Thomson Reuters Recommendation
These facts alone were enough to pique my DGI interest and I looked further into the company, as any intelligent investor would do. I came across these metrics and was very impressed. In fact, Exchange Income Corp. is one of the 65 stocks that Thomson Reuters has awarded the highest score of 10. Not to mention, out of 10 analysts, 2 recommend a Strong Buy, 7 recommend Buying and 1 recommends Holding for a total recommendation of BUY.
I intend to do just that in the coming weeks. Exchange Income Corp. has announced that it is releasing earnings on Tuesday, May 10th (tomorrow). I’ve decided to wait and see what they announce before purchasing to see what the market does to it. Based on the information I’ve collected to date, however, this is a great long-term opportunity and this monthly dividend superstar fits greatly into a Canadian Dividend Growth Investor’s portfolio.
Attractive Valuation & Metrics
As we can see from the data gathered from Thomson Reuters, Exchange Income Corp. is currently well valued and I think it’s trading at a good price. Currently it meets 4 out of 5 of the Dividend Beginner’s Stock Picking Criteria. It would be 5 out of 5 but, like the Big Banks, EIF kept their dividend consistent throughout 2009 to 2010. Disregarding this detail, EIF is a strong stock and contains all of the metrics I look for in a stock.
14.19% Expected 10-Year Yield on Cost
Given their 10-year dividend growth rate of 7.63% and current dividend of 6.80%, the 10-year yield on cost would be a huge 14.19%. Not to mention, given their forecasted earnings growth EPS should grow by about 9% for the next two years as the company increases revenue and becomes more efficient. It’s currently trading at a huge discount relative to it’s 5-year average price-to-earnings ratio and a decent discount to it’s 5-year average forward price-to-earnings ratio. Due to all of this, I think the stock is poised for a future rally and can safely dub it a monthly dividend superstar.
I’m a big fan of Exchange Income Corp. after uncovering all of these facts, but to err on the side of caution for a small-cap stock, I will be waiting to hear on earnings coming out tomorrow before making my concrete decision on whether I’ll be purchasing shares.
What do my fellow investors think about Exchange Income Corp. given these details?
A seasoned investor recently introduced me to this stock. I bought it, and am glad I did. I hope the news on May 10 will be most positive.
Hi Helen,
Great to know we’re looking at the same stocks, You’ve gained a decent bit on share price recently, I hope to buy before the coming ex-dividend date.
BY the way, I like the way you presented the data about this company. Please keep up the good work.
Thanks helen. I do my best.
Props, this is truly awesome background research you’ve done here. Might have to pick up some shares for my portfolio too.
Hey MrSLM,
I appreciate the kind words dude. Would be cool to be fellow share holders on this one. Let’s see what happens tomorrow.
Great work on this post. Thanks for getting the link working btw. I was wondering where you came across longrundata?
And also it seems that the amount they have for the 2009 dividend differs from the chart you have in this post. I was wondering why?