Establishing a passive income stream is the dream of every investor. And while there is no shortage of great options on the market, some dividend stocks are better than others.
Fortunately, there is one stock that pays out a monthly dividend and can serve as a reliable source of passive income.
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Meet your newest monthly payer
Exchange Income Corporation (TSX: EIF) is the answer that income-seeking investors are looking for. Exchange is an acquisition-focused company that owns over a dozen subsidiaries that are broadly categorized into two buckets.
The first is aviation. This includes regional passenger and cargo airlines that serve remote regions of Canada’s north, as well as a flight school. This segment also includes niche services such as medevac operations and aerial surveillance.
The other vertical is focused on manufacturing. This includes custom manufacturing that serves niche markets such as the defence industry, along with specialized fabrication work like tower‑window systems and cell‑tower construction.
Across both segments, Exchange’s subsidiaries share two important traits.
First, they all serve a need where there is limited, if any, competition on the market. This not only provides Exchange with a unique defensive appeal but also helps the company to generate free cash.
That free cash flow remains resilient across economic cycles, allowing Exchange to reinvest in growth while maintaining its coveted passive income stream.
What about that passive income stream
As of the time of writing, Exchange’s monthly dividend currently carries a yield of 3%. This means a $35,000 investment will generate just over $1,000 annually, or roughly $85 per month in passive income.
Investors who choose to reinvest the dividend will see that the monthly payout accumulates into nearly one new share every month.
In other words, allowing an investment in Exchange to grow uninterrupted now can provide a growing future passive income stream.
And speaking of growth, Exchange has provided 18 annual increases to that dividend over the past 20 years. That speaks to the disciplined management of the company, despite its otherwise aggressive stance on expansion.
That’s not to say Exchange’s dividend is without any risk.
The company does have elevated debt levels, as is the case with any acquisition-focused operation. This leaves the company more exposed during prolonged economic downturns, especially in environments where interest rates stay elevated.
Should you buy Exchange for your passive income stream?
Exchange offers a unique mix of diversified businesses operating in niche markets, generating stable revenue. That helps the company to provide investors with a recurring monthly dividend that continues to grow.
For those investors seeking a passive income investment, Exchange is an intriguing option to add to any well-diversified portfolio.
