Canada’s inflation rate held steady in April and May 2025, thanks to subdued price pressures. However, things could change if trade conflicts persist and hamper slow economic growth. Tariff-related issues could drive prices higher and prompt the Bank of Canada to resume its rate-cutting cycle.
Meanwhile, investors may need to prevent erosion of purchasing power. Exchange Income Corporation (TSX:EIF) is the perfect inflation hedge today. Besides the attractive 4.2% dividend yield, the payout frequency is monthly. Also, at $65.53 per share, current investors delight in the market-beating, year-to-date return of 14.1%-plus.
Rating upgrade
The National Bank of Canada upgraded its rating for the industrial stock to outperform following its latest acquisition. Market analysts’ 12-month average price target is $70.6 (+7.7%). Performance-wise, EIF surged 39.1%-plus in the last three months.
The $3.4 billion diversified, acquisition-oriented dividend company derives revenues from two main operating segments: Aerospace & Aviation and Manufacturing. Its 19 subsidiaries provide essential products and services, including medivac and precision-machined components for the defence sector.
On July 2, 2025, Exchange Income announced purchasing Bradley Air Services, the operator of Canadian North, for $205 million. The Competition Bureau of Canada gave the green light but it will monitor the situation. John Gradek, an airline industry expert, believes the takeover of the airline will be good for commercial aviation in the Arctic. “I think from a financial perspective, it’s a good deal for both companies and it’s a good deal for Canadians.”
Exchange Income CEO Mike Pyle is “bullish” on the North and did not pass up on the unique opportunity. “Whether it be the government’s commitment to investing in the military in the North and building bases, all of those will increase travel as people come into the North,” he said. Pyle added that the increasing demand for critical minerals could increase demand for northern air travel.
Solid financial results
In Q1 2025, revenue and free cash flow increased 11% and 32% year-over-year to $668 million and $81 million, respectively, both new first-quarter records. Net earnings rose 40% to $7 million compared to Q1 2024. The Manufacturing segment saw its top line increase by 23% to $286 million in the same quarter.
According to Pyle, the quarterly results illustrated the resiliency, stability, and strength of the EIC business model as well as its foundational tenets of discipline and diversity. “We continue to set records in our key financial metrics, while all of this ambiguity existed in the wider market. It sets the foundation for the remainder of the fiscal year,” he added.
Investor-friendly stock
Exchange Income believes its dividend is your best friend. The collective strength of its diverse portfolio and subsidiaries supports dependable monthly dividends. Management has increased dividends 17 times over two decades. Moreover, the total return of 77.4%-plus over three years (a compound annual growth rate of 21%) is likewise impressive.
Investing in EIF can help protect the value of your investment. The Bank of Canada will prioritize price stability, although the implications of tariffs and trade uncertainty might exert upward pressure.
