When it comes to creating passive income, many investors tend to focus too much on dividends. And fair enough, it seems as though this is the best option for fixed income. The thing is, dividends can be cut. While they might seem safe, if a company is putting too much effort into their dividends and not enough into growth, then the dividend won’t be supported for long.
That’s why today we’re going to focus on a company that could provide growth in passive income from both returns and dividends. So with that in mind, let’s look at this one dividend stock.
Exchange Income
With a dividend yield at 6% and trading at 17 times earnings, Exchange Income (TSX:EIF) looks like an excellent option for passive income these days. EIF focuses on acquiring and managing niche companies in the aviation and manufacturing sectors. It offers a stable dividend and has a strong history of financial performance.
The passive income stock is a diversified company focused on opportunities in aerospace, aviation, and manufacturing. It has a strong track record of delivering consistent earnings and dividends, making it a solid choice for investors seeking passive income.
But don’t take my word for it. Let’s look at its future outlook and recent performance for proof.
How EIF stock is doing
To support this choice as a passive income dividend stock, let’s look at the company’s recent performance. EIF stock reported net earnings of $10 million and adjusted earnings per share (EPS) of $0.20, which beat the consensus estimate of $0.17. The company generated revenue of $601.8 million for the quarter.
Furthermore, for the full year 2023, the company posted record revenues of $2.5 billion and adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of $556 million. This demonstrates the acquisition-oriented firm’s ability to grow even in challenging market conditions.
As for the future, analysts forecast revenues to grow to $2.7 billion in 2024 and $3 billion in 2025. Net income is expected to increase from $142 million in 2024 to $188 million in 2025, reflecting a robust growth trajectory. This growth is supported as EIF continues to focus on operational excellence and strategic acquisitions to drive growth. The company’s diversified portfolio in the aerospace, aviation, and manufacturing sectors provides a solid foundation for future expansion.
Bottom line
So, how can we create that $6,228? To find that out, let’s look at the company’s compound annual growth rate (CAGR). In the last decade, shares of EIF stock have risen by a CAGR of 12.5%. Meanwhile, the passive income stock has seen its dividend rise at a CAGR of 5.2%. So here is how much you would need to invest today if investors wanted to create $6,228 in passive income in the next year.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY | PORTFOLIO TOTAL |
| EIF – now | $43.75 | 755 | $2.64 | $1,993.20 | monthly | $33,031.25 |
| EIF – up | $49.22 | 755 | $2.78 | $2,098.90 | monthly | $37,161.10 |
Altogether, you will have earned around $2,098.90 in dividends, as well as around $4,129.85 in returns. This would create total passive income of $6,228.75!
