Establishing a well-diversified portfolio that can provide both growth and income-earning potential is a key goal for every investor. While the market does give us plenty of options, identifying a stock with a high dividend yield can be a challenge for some investors.
Fortunately, there is one Canadian stock with a high dividend yield that can provide growth and income for years to come. That stock is Exchange Income Corporation (TSX: EIF)
Meet Exchange Income – the stock you don’t know, but will now never forget
Exchange isn’t the most popular of stocks on the market. In fact, most investors may not even know what Exchange does.
In short, Exchange is an acquisition-focused company that is focused on long-term growth and paying out a juicy dividend. The company’s acquisitions are focused on two key segments of the market: aviation and manufacturing.
Prospective investors should note that Exchange offers much more than a list of subsidiary companies. The company’s subsidiaries all cater to unique segments of the market where there is limited competition, yet strong demand. Not only does this help the company establish a recurring revenue stream, but also offers unique defensive appeal.
The sheer necessity provided by those subsidiary companies means that Exchange can weather the short-term fluctuations of a volatile market. By way of example, as of the time of writing, Exchange is up nearly 20% over the trailing 12-month period.
In case you’re wondering, some examples of those subsidiary companies include providing medevac, passenger, and freight services to the remote regions of Canada’s north. Turning to the manufacturing segment, examples include machining components for the defence sector as well as building unique window-wall systems.
What about results?
Operating a diversified business that pays a juicy dividend is great, but it needs to be backed by strong results to ensure those good times continue. Fortunately, Exchange satisfies that requirement as well.
The company reported results for the first fiscal earlier this month which, in a word, were impressive.
In that most recent quarter, Exchange generated first-quarter revenue of $527 million. This record represents a 32% or $126 million improvement over the prior period. The company also earned adjusted EBITDA of $97 million. This reflects a $30 million improvement over the prior period.
Overall, Exchange earned adjusted net earnings of $12 million, or $.027 per share in the quarter. This too was an impressive improvement of 47%, or 35% per share over the prior period.
Let’s talk about that dividend
While strong results and boasting defensive appeal are great, the most compelling reason why investors flock to Exchange is its dividend.
EIF stock offers investors an appetizing 4.75% yield that is distributed on a monthly cadence. If that’s not enough, Exchange has provided investors with annual bumps to that dividend on a near-annual basis with 16 increases over the past two decades.
For prospective investors, this means that a $30,000 investment in Exchange (always as part of a larger, well-diversified portfolio) will earn a monthly income of $117.
Keep in mind that investors who are not ready to draw on that income just yet can opt to reinvest those dividends. This allows them to grow until needed, increasing that eventual income even further.
Exchange: The Canadian stock with a high-dividend yield
Exchange ticks the boxes that most investors look for. The company offers a well-diversified revenue stream that also boasts defensive appeal. Exchange is also constantly looking to expand its footprint through new acquisitions, translating into further revenue growth.
Finally, Exchange offers a very juicy monthly dividend that has seen frequent increases over the past two decades.
In my opinion, Exchange is a great Canadian stock with a high dividend yield that should be a core holding in every well-diversified portfolio.
