Canada’s largest stock exchange and the world’s tenth-largest rose in value last year despite heightened volatility in some months. The S&P/TSX Composite Index delivered an 18%-plus return in 2024, more than double the 8.1%-plus gain in 2023. On December 6, 2024, it reached an all-time high of 25,691.80.
As of January 8, 2025, the index has advanced 1.3%-plus from year-end to 25,051.68. Information technology continues to lead the 11 primary sectors at the year’s start. Financial services, where bank stocks belong, is the third-best performer with a 24.8%-plus trailing one-year price return.
Amongst financial stocks, Dominion Lending Centres (TSX: DLCG) stands out from its peers and is a screaming buy. The small-cap stock outperforms the broad market and financial sector, including the Big Banks. At $7.71 per share, this financial stock is up 188.1% from a year ago. Whether you invest $1,000 or $10,000, you can earn in two ways: price appreciation and dividend income. DLCG pays a 1.5% dividend.
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Business overview
Dominion Lending is a non-bank lender providing mortgage brokerage franchising and mortgage broker data connectivity services in Canada. Under its umbrella are three subsidiaries: MCC Mortgage Centres Canada, MA Mortgage Architects, and Newton Connectivity Systems.
The $612.1 million company offers various mortgage products, including residential and commercial financing, as well as equipment leasing. Dominion has around 521 franchises and 8,784 brokers to assist customers in preparing for and securing loan approvals. According to management, falling interest rates are tailwinds, and the company is well-positioned to capitalize on improving market conditions.
Financial performance
The full-year 2024 financial results are not out yet, although Dominion Lending’s funded volumes have reached $19.7 billion (11% year-over-year increase) after the first three quarters.
In the nine months ended September 30, 2024, revenue rose 17% year-over-year to $54.5 million, while net income soared 480% to nearly $12 million from a year ago. Notably, free cash flow (FCF) attributable to common shareholders climbed 94.1% to $10.5 million versus the same period in 2023, partly due to lower maintenance capital expenditures.
Dominion Lending’s Velocity, Newton’s propriety connectivity platform, is a cloud-based mortgage application software system used by brokers and brokerage owners to manage the entire mortgage approval process. Velocity obtained SOC 2 Type II certification last November 2024. It commits to the highest information security, availability, and confidentiality standards.
Its Executive Chairman and CEO, Gary Mauris, said, “We are pleased that the adoption of our technology connectivity platform ‘Velocity’ continues to grow.” He added that DLCG-submitted volumes increased 73% in Q3 2024 compared to Q3 2023. The core objective is to recruit and retain franchises and brokers while onboarding brokers onto Velocity.
Demand surge
The Bank of Canada’s rate-cutting cycle in 2024 helped lower inflation, but the pace could slow down this year. Nonetheless, lower mortgage rates will increase buyer demand and benefit sellers. Dominion Lending Centres can expect higher activity as rate cuts drive the housing market recovery and return to stability. The share price could skyrocket along with sales and profit.
