The average Canadian dividend investor typically seeks stable, long-term growth and income, with a preference for blue-chip companies listed on the TSX. Yet according to recent surveys, only about 40% of Canadian investors hold dividend-paying stocks in their portfolios, with the average yield targeted around 4-5% annually.
But how many of these investors reinvest their dividends, a strategy known as dividend-reinvestment plans (DRIPs)? This compounds returns over time. And today, we’re going to look at one dividend stock offering a great deal on dividends.
Olympic Financial
Olympia Financial Group (TSX:OLY) is a Canadian financial services company that operates through various subsidiaries. It provides a range of services, including foreign exchange, investment account administration, corporate and shareholder services, and Tax-Free Savings Account (TFSA) administration. The company is known for its steady growth and commitment to providing innovative financial products and services across Canada.
In particular, the dividend stock is notable for its consistency and growth. Olympia has a strong track record of paying regular monthly dividends to its shareholders, reflecting its solid financial performance and management’s commitment to returning value to investors.
Furthermore, Olympia has steadily increased its dividend payouts over the years, making it an attractive option for income-focused investors. The company’s ability to maintain and even grow its dividends, even in challenging economic environments, speaks to its robust business model and strong cash flow generation.
Recent earnings
That’s all well and good in the past, but what about the future? To learn more, we can dive into the company’s recent earnings report. Olympia reported strong financial results for the first quarter of 2024, demonstrating a solid performance across key metrics. Notably, the company achieved a 10% increase in total net earnings and comprehensive income, reaching $5.74 million, up from $5.23 million in the same period last year.
This growth was driven by a 9% increase in total revenue, which rose to $25.84 million, mainly due to higher trust income in the Investment Account Services division. Plus, the dividend stock reported a 15% increase in trust, interest, and other income. This came from the favourable impact of higher interest rates on trust fund placements over the past year.
While the overall financial performance was strong, Olympia did experience some increases in expenses, which may be a cause for concern. Direct and administrative expenses, excluding depreciation and amortization, rose by 6% to $16.99 million from $16.10 million in the previous year. This increase was primarily due to higher salaries, bonuses, and management fees within the Investment Account Services division, driven by revenue growth. Although the expense growth was tied to revenue increases, it still represents a significant cost pressure that could affect profitability if not managed carefully. In short, keep an eye on it.
Bottom line
Overall, Olympia’s recent earnings report highlights positive momentum, with solid revenue and income growth. The company has successfully leveraged its strengths in the financial services sector, benefiting from rising interest rates and a growing client base.
Meanwhile, Olympia presents an attractive valuation based on several key metrics. With a trailing price-to-earnings ratio of 10.55, the stock appears reasonably priced relative to its earnings, especially compared to the broader market. The company’s also holds a modest amount of debt, as indicated by the low total debt-to-equity ratio of 12.10%.
Add in that the stock offers a compelling dividend yield of 7.20%, which is attractive for income-seeking investors. The payout ratio of 55.06% also suggests that Olympia is managing its dividend payments not just well but even conservatively. This ensures it can sustain these payments even in varying market conditions. In fact, here is what a $5,000 investment could get you in dividends today.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY | PORTFOLIO TOTAL |
| OLY | $100.50 | 49 | $5.80 | $284.20 | monthly | $4,924.50 |
So, now that there is one stock offering a significant dividend at $5.80, I would certainly recommend you latch on while you still can, especially for a $284.20 dividend dished out monthly.
