One of the things that is constantly mentioned to investors is the importance of diversifying your portfolio. As we’ve all learned, there’s a good reason for that statement, and over the years there have been countless analogies stressed to emphasize that point. But what if you could get the benefit from diversification through a single investment that not only provided strong growth prospects but also a lucrative monthly dividend…Would you consider investing?
If you’re even remotely considering that option, allow me to introduce you to the incredible opportunity that is Exchange Income Corp (TSX:EIF).
Exchange Income Corp. is an acquisition-focused company that owns over a dozen different subsidiaries segmented under two broad groups: aviation and manufacturing. The subsidiaries themselves each have two unique factors that help make Exchange Income a unique investment option- they provide a necessary service to remote areas of the market where there is limited competition, and generate positive cash flow.
Some examples of this in the aviation sector include providing passenger and cargo services to remote areas of Northern Ontario, Nunavut, and Manitoba, to owning the largest flight training college in the country.
Turning to the manufacturing segment, Exchange Income’s mix of companies is even more diversified, comprising everything from window-wall system manufacturing services, precision-machined specialized component assemblies for the aerospace sector, cell phone tower construction, and trailer-mounted tanks used for transporting a variety of liquids.
What about results? As diversified as Exchange Income’s subsidiaries are, what really showcases the strong potential of the company comes in the form of reviewing its recent quarterly report.
Exchange Income’s latest set of quarterly results are still a few weeks out, but in the most recent quarterly update provided, the company earned $24.16 million, or $0.72 per diluted share, just bearing the $23.9 million, or $0.72 per diluted share reported in the same quarter last year.
Free cash flow for the quarter came in at $64.2 million, or $1.76 per diluted share, thereby representing a gain over the $55.84 million, or $1.58 per diluted share reported in the same period last year.
Finally, let’s take a moment to talk about dividends. Exchange Income offers investors a monthly distribution, which currently provides an extremely attractive 7.51% yield. In addition to the handsome yield, investors can take solace in the fact that the payout ratio is at a sustainable 68%. In terms of dividend growth, the company last announced a 4.3% hike to its dividend back in February of last year, and the company has maintained a near-annual schedule of dividend hikes.
Should you buy? Exchange Income provides investors with strong growth, an excellent monthly dividend and a diversified business model that incredibly faces limited competition. In short, buy the stock and hold it for a decade.
Fool contributor Demetris Afxentiou has no position in any of the stocks mentioned.
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