Put This Canadian Dividend Stock Into Your Portfolio and Watch the Income Roll in

Exchange Income Corporation (TSX:EIF) provides dividend investors with steady, rising dividend payments based on a diversified business model built through organic growth and acquisitions.

| More on:
The Motley Fool

At the moment, there are some interesting opportunities in Canadian dividend stocks. Yields are high, share prices are low, and dividends still provide tax advantages over fixed-income alternatives such as bonds and GICs. Exchange Income Corporation (TSX:EIF) is one stock you could add to your portfolio and watch the dividends roll in.

The company has two operating segments: Aerospace and Aviation, and Manufacturing. The Aerospace and Aviation segment provides scheduled, charter, and emergency medical services to a number of Canadian provinces and territories. It also designs, modifies, maintains, and operates sensor equipment and aircraft to provide maritime surveillance in Canada and internationally.

The Manufacturing segment produces goods and services for aerospace, water recycling, and many other industries. The array of its businesses and operations in multiple geographic regions provides a degree of diversification for the company’s earnings.

The mid-cap market in Canada has a number of dividend stocks ripe for the picking. Many of these companies have yields higher than 5% that are still growing. In addition to the rich dividends, these stocks can be found in a number of different sectors, offering diversification away from banks, oil, and utility stocks that tend to dominate the large-cap portion of the Canadian stock market.

In the first quarter of 2018, EIF’s financial results were quite positive. The company’s results were consistently improved across all of its business segments, which speaks to the strength of the business. Revenue grew by 20%, net earnings rose 55%, and the dividend-payout ratio as a percentage of net earnings fell to 69%.

EIF’s strong financial results have enabled the company to provide a significant return to shareholders through dividend payments. The company has raised its dividend payouts every year since at least 2014. If its solid financial growth continues, the company has expressed that these payouts and increases should continue into the foreseeable future.

Since this is a company focused on making acquisitions, EIF has a substantial amount of long-term debt. The cost of debt has been rising with interest rates, so acquisitions may slow down, reducing growth, or EIF may fund acquisitions with more equity than it has in the past. The company does not believe its debt to be a material issue, however, and is currently looking for more acquisition targets.

Even with the potential risks from debt, I am especially impressed with the company’s focus on the long-term development of its business, sometimes at the expense of short-term fluctuations in earnings. Over the years, many investors have been spooked by short-term earnings misses by this company, as it invests those earnings for the long run.

Exchange Income Corporation is dedicated to providing investors with steady, growing income. While investors should be wary of the debt on its balance sheet, the company’s strategy appears to be paying off. As long as investors are aware of the short-term stock price fluctuations that can affect this company, buying shares of EIF would be an excellent way to diversify dividend income streams.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Kris Knutson owns shares of EXCHANGE INCOME CORPORATION.

More on Dividend Stocks

money cash dividends
Dividend Stocks

TFSA: 3 of the Best Canadian Dividend Stocks to Buy This Year

Are you looking for some of the best Canadian Dividend stocks to buy this year? Here are three great options…

Read more »

Man data analyze
Dividend Stocks

2 Recession-Tough Stocks to Buy in February 2023

TSX stocks, such as Jamieson Wellness, are trading at compelling valuations and might deliver stellar gains to investors.

Read more »

A worker overlooks an oil refinery plant.
Dividend Stocks

Defensive Investors: 3 Stocks to Shore Up Your Portfolio

Fortis is a defensive stock with an impressive track record.

Read more »

edit Woman calculating figures next to a laptop
Dividend Stocks

Passive Income: 2 Cheap Stocks to Buy and Never Sell

Buying dividend stocks cheap and discounted is a strategy many value investors pursue to maximize the return potential.

Read more »

Female friends enjoying their dessert together at a mall
Dividend Stocks

Dividend Stocks: Will Debt Load Put a Damper on This Top Stock in 2023?

This dividend stock has a very solid track record of revenue and cash flow growth, ,as well as dividend growth,…

Read more »

A plant grows from coins.
Dividend Stocks

How to Invest in One of the Most Important Commodities in the World (It’s Not Gold)

Many things we take for granted may offer economic value and a powerful investment opportunity beyond commodities like gold or…

Read more »

growing plant shoots on stacked coins
Dividend Stocks

Need Passive Income? Turn $15,000 Into $1,016 Annually With These 2 Dividend Stocks

Canadian investors with limited capital can create passive-income streams from two high-yield dividend stocks.

Read more »

Businessman holding tablet and showing a growing virtual hologram of statistics, graph and chart with arrow up on dark background. Stock market. Business growth, planning and strategy concept
Dividend Stocks

Why Brookfield Infrastructure Partners Stock Rose 11.8% Last Month

Most, if not all, investors could do well by buying quality dividend stocks like Brookfield Infrastructure Partners (TSX:BIP.UN) on dips.

Read more »