Every day there are news articles telling us that Canadians are up to their eyeballs in debt and that times are not as good as they seem because people are borrowing on high-interest credit cards to be able to take their kids to hockey practice.
It’s therefore not a surprise that people find themselves in a bind when they go to big banks to secure a line of credit or a mortgage only to be rejected because they already have too much debt or are behind on their payments because they are prioritizing their family over their financial plan.
While there are only limited choices for folks in dire financial straits, there is one company that stands out as building a business model, putting financially vulnerable Canadians back on firm financial footing and making a nice profit in the process.
The company I am talking about is goeasy Limited (TSX:GSY). Established in 2006 and headquartered in Mississauga, Ontario, the company provides non-prime leasing and lending services through its easyhome and easyfinancial divisions.
With a wide variety of financial products and services, including unsecured and secured installment loans, goeasy aspires to help put Canadians on a path to a better financial future as they rebuild their credit and graduate to prime lending.
In simple terms, you approach goeasy when the traditional big banks don’t think you are creditworthy and won’t bother taking a chance on you.
Customers can transact seamlessly with easyhome and easyfinancial through an omni-channel model that includes online and mobile, as well as over 400 leasing and lending locations across Canada supported by more than 1,900 employees.
The company has served over one million Canadians and has originated over $3.6 billion in loans, with one in three customers graduating to prime credit and 60% increasing their credit score within 12 months of borrowing.
Explosive dividend growth
In order for goeasy to be successful, it must have significant loan origination, and the company has not disappointed on that front. It has gone from lending just a shade under $200 million per year in 2014 to lending more than a billion dollars as of the last 12 months.
This is an over 40% loan growth per year, which has been the biggest driver of its excellent financial performance.
It therefore shouldn’t be a huge surprise that the company’s revenues have more than doubled from about $250 million to more than $550 million in the last five years. Alongside this, its adjusted earnings per share have gone from $1.34 in 2014 to $4.74 per share over the last 12 months.
This kind of stupendous growth in earnings usually translates very nicely into dividend growth and goeasy is an absolute champion on that front, clocking in an industry-leading 30%, going from $0.085 in 2014 to $0.310 in 2019.
What’s even more impressive is that based on its 2018 earnings and the company’s confidence in its continued growth, the board of directors approved a year-over-year dividend increase of 38% from 2018 to 2019. I can’t recall any company raising its dividend by this much in a very long time.
Investor takeaway
The company had a tremendous 2019, rewarding investors with a 100% gain on their investment if they had bought shares in January when the stock was trading in the $30 to $35 range. Since then, the stock price has exploded and is hovering around $65 at the time of writing.
If goeasy can maintain its double-digit dividend growth, investors will continue to reward the stock and the stock price should continue to rise. The stock is still very reasonably priced with a P/E ratio of 13.5.
The dividend yield is just a shade under 2% at the moment, but it is likely to double by 2022, which means smart investors who get into the stock now will get handsomely rewarded very soon.
