Finding the perfect dividend stock that pays out on a monthly cadence is a rare thing on the market. Most dividend stocks pay out on a quarterly basis, and those that do pay out monthly often lack a juicy yield that makes the monthly income stream viable.
And that’s where the appeal of this juicy 5% stock comes into play
Meet Exchange Income Corporation
Few investors may know of Exchange Income Corporation (TSX:EIF), but chances are that you won’t forget the stock once you see the potential it can offer.
For those unaware of the stock, Exchange owns a basket of over one dozen subsidiary companies. Those subsidiaries are divided into two groups, which broadly fall under aviation and manufacturing labels.
On the aviation side, those companies include regional airlines that provide service to remote regions of the country. It also comprises unique niche operations such as a flight school, and providing medevac and cargo services to Canada’s north.
Turning to the manufacturing side, the subsidiaries include unique businesses such as cell tower fabrication and manufacturing of window wall systems used in high-rise residential buildings.
Both segments have some unique commonalities that prospective investors will appreciate.
Specifically, they all provide a necessary service or product for which there is demand, but surprisingly little competition. This puts the company in a unique, if not advantageous position, which leads me to the second point.
All of Exchange’s subsidiary companies generate cash. This means Exchange can focus on investing in new acquisitions and paying out a generous dividend.
Intrigued? Good. Let’s talk results
Exchange recently announced results for the second fiscal quarter of 2023. In that quarter, the company reported revenue of $627 million, which was a record high. This was a 19% improvement over the same period last year when Exchange reported revenue of $529 million.
Overall the company earned $37 million, or $0.85 per share in the most recent quarter. This represents an increase of 23% and 12%, respectively, over the same period last year.
Exchange’s uniquely diversified business model also provides investors with some defensive appeal to consider. By way of example, Exchange’s Multi-Storey Window Solutions subsidiary boasts an order book of nearly $1 billion.
Additionally, the company is also realizing synergies between its various component companies. This includes cross-selling and collaboration on projects both in Canada and internationally, which has the potential to drive performance even higher.
Despite that significant opportunity, Exchange trades at a near 5% discount year to date.
Income investors: Invest in this dividend stock now
One of the main reasons why investors flock to Exchange is for the juicy income that it provides. Specifically, Exchange offers a 5.09% yield distributed monthly, making it an attractive dividend stock to own.
To put that into perspective, consider an investment of $25,000 in Exchange. Investors can expect to generate a first-year monthly income of just over $100 on that investment.
And the reason I say first-year is because Exchange has provided investors with upticks to that dividend. In fact, the company boasts 16 increases over the past 19-year period.
In other words, Exchange isn’t just for those investors who want to generate an income right now.
Those investors who have a longer investment timeline can and should buy Exchange now and reinvest that income until needed. This can provide a decade or more of additional growth to that stock.
In my opinion, Exchange is an excellent dividend stock to buy as part of a larger, well-diversified portfolio.