Stock market investing has been nothing short of interesting over the last few years. The macroeconomic environment has been uncertain due to several factors since the pandemic struck. With the world moving into a post-pandemic era, the rapid growth in economic activity combined with historically low interest rates to fuel inflation.
Red-hot inflation saw central banks in the US and Canada enact a series of aggressive interest rate hikes for almost two years.
The slowdown in economic activity as a result, has started cooling inflation. The anticipation of interest rate cuts led to a rally in equity markets toward the end of 2023. However, the recent announcement of interest rate cuts being slower than anticipated will likely lead to more volatility in 2024.
Given the uncertain outlook, Canadians would do well to offset the potential losses from market volatility by creating more revenue streams.
Canadian stock market investors interested in generating passive income have no shortage of options to consider when creating their self-directed portfolios. If they have contribution room available in their Tax-Free Savings Accounts (TFSAs), they have the opportunity to build tax-free income streams to achieve various short- and long-term financial goals while protecting their finances from a volatile market.
Today, we will look at a model dividend stock that could be an excellent holding in a TFSA for this purpose.
Exchange Income
Exchange Income (TSX:EIF) is a $2.15 billion market capitalization company headquartered in Winnipeg. The company is an acquisition-oriented corporation focusing on aerospace and aviation services and equipment and manufacturing.
The company utilizes its funds to invest in well-established companies that boast strong cash flows within niche markets. It does not invest in companies on their way to becoming profitable. Rather, it prioritizes acquiring businesses that are already profitable.
With its subsidiaries operating across several aviation and manufacturing verticals, the company’s cash flows also offer a substantial defensive appeal. Besides operating in niche markets, its subsidiaries offer services and products where they do not have much competition.
The most important aspect of all its subsidiaries is that all of them generate cash for Exchange Income. In turn, the stable and healthy cash flows allow the company to continue investing in more acquisitions and fund generous monthly dividends to its investors.
While its diversified operations undoubtedly give EIF stock a defensive appeal, the stock trades at a 17.29% discount from its 52-week high as of this writing. At $46.10 per share, EIF stock pays its shareholders their monthly dividends at a 5.73% annualized dividend yield.
Foolish takeaway
The monthly dividend payouts make EIF stock an attractive holding to consider, especially if there is contribution room available in a TFSA. In the last 19 years, EIF stock has also increased its dividends 17 times, making it an even more appealing holding for income-seeking investors.
EIF stock has a solid business model that diversifies its revenue streams to give it a defensive appeal while offering high-yielding monthly dividends. While no investment is risk-free, EIF stock has everything going for it in terms of providing a degree of stability in another potentially volatile year of stock market investing.
