The Canadian real estate market has sidestepped naysayers since the Great Recession. However, the success of the housing market has taken place under the umbrella of historically low interest rates. A spike in inflation rates following the COVID-19 pandemic forced the hand of the Bank of Canada (BoC), and it pursued its most aggressive rate tightening program since the early part of this millennium.
Today, I want to zero in on one of the top alternative lenders in Canada: EQB (TSX: EQB). This company and stock have thrived in large part due to Canada’s housing market. In this piece, I want to explore how much a $10,000 investment in EQB in 2010 would be worth today. Let’s dive in!
How has this stock performed over the past year?
Shares of EQB have dipped 2.6% month over month as of close on Friday, August 25. Meanwhile, this housing stock is still up 32% so far in 2023. Its shares have surged 41% year over year. Investors can look further at its performance over the years with the interactive price chart below.
EQB has delivered superb earnings in recent years
This company released its second-quarter (Q2) fiscal 2023 earnings on August 1. EQB reported adjusted net income of $115 million — up 88% compared to the previous year. Like its peers in the financial space, the company saw credit growth somewhat curbed, but net interest income increased significantly. Adjusted diluted earnings per share (EPS) surged 70% year over year to $2.98. That was also up 14% compared to Q1.
Increased interest rates have put more pressure on borrowers over the past year. However, demand remains extremely strong in the Canadian housing market. The high interest rate environment may push out “weak hands” in the real estate space, but in the current climate, there are consistently buyers who are willing to embrace the burden to get in on the Canadian housing space. The combination of low supply, sky-high demand, and record immigration should keep investors optimistic about the medium-term future of this market.
In the year-to-date period, EQB delivered adjusted net income growth of 41% to $217 million. Meanwhile, adjusted diluted EPS climbed 27% to $5.60.
EQB saw its customer base rise 31% to 367,790 in Q2 2023. Meanwhile, total deposits increased 8% year over year to $8.2 billion. Its reverse mortgage assets climbed 143% year over year to $1.02 billion. Moreover, its single-family resident portfolio jumped 29% to $30.3 billion. In that portfolio, 36% of single-family residential lending is insured.
Here’s how much your 2010 investment would be worth today and why I’m buying more!
Shares of EQB closed at $10.50 per share on August 25, 2010. At the time, we could have purchased 952 shares of EQB for a total price of $9,996.
Fast forward to the present day. EQB stock closed at $75.49 on Friday, August 25. Those same 952 shares that we bought in 2010 would be worth $71,866.48. That means you would have gobbled up capital growth of $61,870.48 over a 13-year period. The crazy thing is the stock looks like it still has plenty of legs.
EQB stock currently possesses a price-to-earnings ratio of 8.1. That puts this housing stock in terrific value territory at the time of this writing. Moreover, EQB last paid out a quarterly dividend of $0.38 per share. That represents a 2% yield. It has hiked its dividend payout by 23% compared to the same period in 2022.
