Updated May 25, 2021 by Bob Ciura
The industrial aerospace industry is not known for high dividends or even dividend growth in either the US or Canada. Exchange Income Corporation (EIFZF) is a unique Canadian company that acquires aerospace, aerospace, and manufacturing companies.
Exchange Income’s acquisition and growth strategy has enabled the company to reward shareholders with regular dividend increases since going public. Combined with the high dividend yield of over 5%, this stock should pique the interest of any high-income investor.
In addition to the high dividend yield, the share is also unique because it pays off per month Dividends instead of the traditional quarterly payout schedule. Monthly dividend payments are far superior for investors who need to budget their dividend payments (e.g. retirees).
There are currently only 55 monthly dividend stocks. You can see the full list of monthly dividend stocks (along with key financial metrics like dividend yields and price / earnings ratios) by clicking the link below:
The high dividend yield and monthly dividend payments of the Exchange Income Corporation are two big reasons this company excels for prospective investors.
This is especially true when you consider that the S&P 500 Index is currently only averaging 1.4% return. In comparison, Exchange Income has a return of more than 3 times the average dividend yield of the S&P 500.
Even so, all high-yield stocks still require adequate due diligence to ensure their payout is sustainable. Fortunately, the dividend payout appears sustainable, which means the stock looks attractive to high-income investors.
Exchange Income Corporation provides aerospace and aviation services by offering scheduled airlines and charter flights Services, emergency services, after– –Market aircraft and engines and flight training services for pilots.
In addition, the The company invests in the manufacture of window wall systems for skyscrapers, ships and other industrial uses.
Finally, Exchange Income also owns telecommunications towers that It is leased to the largest telecommunications providers in America and Canada. The Company generated just over $ 1 billion yearly Sales, is based in Winnipeg, Canada.
The company has two operating segments: Aerospace & Aerospace and Manufacturing.
Source: Investor Relations
Aerospace and aerospace make up the bulk of the company’s EBITDA. The company’s strategy is to expand its portfolio of diversified niche businesses through acquisitions in order to provide shareholders with a reliable and growing dividend.
The acquired companies are in reasonable niche markets and EIC has made over 20 acquisitions since its inception in 2004.
Acquisition candidates must have a track record and strong, continuous cash flow generation, with dedicated management focused on building the business after the acquisition.
Growth has been strong in recent years, but since 2020 the company has been hit by the coronavirus pandemic and its impact on the global aviation industry. May 13thth, 2021, Exchange Income reported the first quarter– –2021 results for the quarter ended March 31st2021. Income came at $248.5 Million, a decrease of 2% a year– –over– –year (in constant currency).
This was due to a decrease in $14.4million in the Aerospace & Aviation segment, which was partially offset by an increase of $ 9.34 Millions in manufacturing Segment. Although the company is recovering, air travel continuesInue suffer from COVID– –19. Still Overall sales weren’t as disastrous as the niche activities include Medevac, seismic support, and other services usually secured by contract by government agencies.
The adjusted EPS was $ 0.25, against only $ 0.05 in Q1– –2020, due to the difficult environment in which the company found itself the first months of the pandemic outbreak. Despite the challenges, the company has adapted Free cash flow per share remains robust $0.97.
Inclduring maintenance Expenses was that number $ 0.45 during the Quarter, a massignificant improvement from $ 0.058 last year. As a result, the payout ratio to free cash flow is currently at 104%, which means that dividend coverage will soon normalize. Management has assured investors that The company remains committed to its dividend, as it did in the tough 2020, and expects further recovery in the company’s results.
We expect earnings per share for fiscal 2011 to be $ 2.20, assuming Company a partially recoversAviation business. We have set our estimated 5-year growth rate of adjusted EPS up to 7%as the company’s bottom line is gradually recovering in one post– –COVID– –19 world.
We keep ours Dividend per share growth Projections at At 4% during this periodslightly lower than the company’s historical (Canadian) average. this includes some delay in its finances amid the somewhat slow recovery from pandemic conditions.
As with many high yield stocks, most of the future expected returns on exchange income will come from dividend payments. Management has been committed to increasing the dividend and rewarding shareholders, and has been since its inception.
The cash dividend payment has increased 14x since 2004, and it’s impressive that the company was able to maintain the dividend last year even during the pandemic.
Source: Investor Relations
Today the annualized dividend payout is $ 2.28 per share per year in Canadian dollars. Of course, US investors need to convert the dividend payout into US dollars to calculate the current rate of return.
Based on prevailing exchange rates, the dividend payout is approximately $ 1.89 per share in US dollars, which translates to a high dividend yield of 5.8%. Exchange Income’s dividend growth has been stable and consistent over the long term.
Using projected adjusted earnings per share of $ 2.20 for 2021, the stock has a payout ratio of approximately 82%. This means that the current dividend payout is covered by the underlying earnings, albeit without much cushioning.
We consider the stock to be slightly overvalued. From a total return point of view, we see the potential for a high single-digit total return on an annual basis in the future. This will be made up of a dividend yield of 5.8%, annual EPS growth of 7% and a low single-digit offset from a falling P / E multiple.
Exchange Income Corp’s high dividend yield and monthly dividend payments appeal immediately to high-income investors and retirees alike.
This analysis suggests the company’s dividend is safe as measured by its non-GAAP metric, free cash flow minus maintenance capital expenses.
The company appears to be slightly overvalued on a price / earnings basis. At the same time, the company has a solid total return forecast. As a result, the Exchange Income Corporation appears to be a good choice for high income investors.
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