TSX’s financial sector, where bank stocks belong, gained 25.07% in six months, including five interest rate cuts beginning in June 2024. Except for Toronto Dominion Bank, the big bank stocks are in positive territory after three quarters in fiscal 2024. The rate-cutting cycle is a tailwind not only for the sector but the broad market as well.
However, a small-cap financial stock is a screaming buy in December. Dominion Lending Centres Group (TSX:DLCG) outperforms the sector (+26.68%) and the TSX (+20.59%). Moreover, at only $7.98 per share, the year-to-date gain is +193.4%. Anyone who invested $9,996 (3,675 shares) at year-end 2023 is $19,330.50 richer today.
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Returning buyers
Dominion Lending is a $383.8 million national mortgage brokerage and leasing company providing mortgage products under its first-time homebuyer programs and extending financing solutions to self-employed individuals, including those with limited access to credit or unsatisfactory credit records.
The housing market shows that buyers are back, evidenced by increasing home sales. The pent-up demand is gradually converting into transactions as rates fall. Industry experts expect the market to gain steam following the 7% year-over-year increase in October home sales. Lower short-term interest rates and rising inventories of unsold homes should likewise spur real estate market activity.
Strong momentum
“The DLC Group maintained its strong momentum from the first half of the year, achieving an 11% increase in funded volumes and a 13% increase in revenues for Q3 2024 compared to Q3 2023,” said its executive chairman and chief executive officer (CEO), Gary Mauris.
In the nine months ended September 30, 2024, net income soared 480% year over year to $11.98 million. Because of higher revenues, income from operations and free cash flow climbed 46% and 94% to $21 million and $10.5 million from a year ago. Around 8,784 brokers and 521 franchises helped facilitate the mortgage transactions.
Allied business
DLCG’s three principal subsidiaries, MCC Mortgage Centre Canada, MA Mortgage Architects, and Newton Connectivity Systems, are why the business thrives nationally. An allied business is commercial equipment financing through the Easy Lease program.
Customers or any business operating or generating revenues from almost any equipment over two years can apply to DLCG’s leasing program. The equipment can be machine tools, construction equipment, computers, copiers, office furniture, software, and manufacturing, medical or dental equipment. There are vendor programs for structured financing.
Through Newton Connectivity Systems, DLCG also deals with information security, availability, and confidentiality. Velocity, its proprietary connectivity platform, achieved Service Organization Control 2 Type 2 certification. According to Mauris, Velocity ensures data management in a controlled and secure environment.
Mauris added, “As information, technology and security are fundamental to DLCG’s business, it is important to have an integrated and cohesive technology department managed by a trusted professional.” On November 21, 2024, the company announced the promotion of Steve Mitchell, vice-president of IT and Applications, to chief information officer.
Strong growth prospects
DLCG is hard to ignore, especially if you’re a growth investor. The small-cap financial stock boasts businesses with strong growth prospects. It pays a modest 1.5%, but the payouts could grow over time along with earnings.
