Establishing a stable and recurring passive income stream is something that is high on the wish list of every investor. Unfortunately, accomplishing that task can be difficult when factoring in multiple investments with differing payout schedules.
That’s where the appeal of this little-known dividend stock comes into play.
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The dividend stock your portfolio needs
One of the most intriguing investments on the market is Exchange Income Corporation (TSX:EIF). For those who are unfamiliar with the stock, Exchange owns a dozen subsidiary companies classed into Aviation and Manufacturing segments.
Examples of this include providing medevac, cargo, and passenger services to Canada’s remote regions on the aviation side of the business. On the manufacturing side, examples include CNC machining and fabricating services, as well as providing mats and bridging services.
What makes those subsidiaries so unique is the defensive appeal they offer. All of those subsidiary companies offer unique services where there is plenty of demand, but little, if any, competition.
More importantly, that defensive appeal lets Exchange weather market volatility while continuing to provide a solid income (more on that in a second).
If that’s not reason enough for investors to consider buying Exchange now, there’s one more reason to consider.
Exchange currently trades at a slight discount. Year to date, the stock is down nearly 5%, which is incredible considering the immense growth that it continues to boast.
In the most recent fiscal year, Exchange saw its sales hit $2 billion, reflecting a year-over-year improvement of 46%. Free cash flow came in at $332 million for the full year, representing an impressive 36% year-over-year increase.
What about that passive income?
One of the main reasons why investors continue to flock towards Exchange is for the company’s juicy dividend. Exchange pays out that dividend on a monthly cadence, and has done so without fail since 1994.
Over the course of that period, Exchange has bumped that dividend 16 times. As of the time of writing, the dividend works out to an appetizing 5.1%. This means that prospective investors who allocate $40,000 towards investment in Exchange can look to generate a monthly income of just over $165.
Oh, and let’s not forget that the payout ratio on that juicy dividend stands at a respectable 58%.
Finally, keep in mind that investors with longer timelines who aren’t ready to draw on that income yet can reinvest it until needed.
Final thoughts
No stock is without risk, and that includes Exchange. Fortunately, Exchange not only offers a juicy dividend and strong growth prospects but also some defensive appeal through its broad array of subsidiary companies.
In my opinion, Exchange represents a great passive income option that should form part of a larger, well-diversified portfolio.
