Investing in a financial institution beyond the Big Six banks can be a fantastic way to create passive income from dividends. These smaller companies often fly under the radar yet can offer solid returns and dividends. The companies tend to focus on niche markets, have less exposure to global financial pressures, and often offer higher dividend yields to attract investors. Plus, with less media attention, there’s potential for growth as more investors catch on. While the big banks are safe bets, a smaller player can sometimes surprise with better yields and unique opportunities. Here’s one to consider.
A smaller stock in the financial sector
Olympia Financial Group (TSX:OLY) is a lesser-known gem of the financial sector in Canada. It’s not one of the big guys, but it has carved out a solid niche by offering a range of financial services that go beyond what the big banks typically provide. From registered account administration to currency exchange, Olympia focuses on providing specialized services. This gives it a loyal client base and room for steady growth. Its approach might not be flashy, but it’s effective. It has been quietly building a reputation for strong management and consistent performance.
What makes Olympia especially interesting is its commitment to paying out dividends. While not a Dividend Aristocrat, it’s shown a good history of paying regular dividends. With its focus on niche financial services and less exposure to the risks that come with global banking giants, it offers a way to diversify your portfolio while still enjoying the perks of regular dividend payouts.
Business performance
Olympia Financial’s 24% profit margin and 71% return on equity are standout metrics for a smaller financial institution, reflecting effective management and the ability to generate returns. However, its slight 1.3% year-over-year drop in recent quarterly earnings might signal some challenges in sustaining growth. So, keeping an eye on growth in upcoming quarters will be key.
Olympia has more than $25 million in cash and minimal debt, making it well-positioned to maintain its dividend. The dividend itself is impressive, with a forward annual yield of 7.27%.
Bottom line
Here’s what a $10,000 investment in Olympia could bring in through dividends.
| RECENT PRICE | NUMBER OF SHARES | ANNUAL DIVIDEND | TOTAL PAYOUT OVER 1 YEAR |
| $99 | 101 | $7.20 | $727.20 |
You’d end up receiving $727.20 in dividends over the course of one year. But because Olympia’s payout schedule is monthly, you’d be looking at a nice $60.60 deposit into your brokerage account each month.
