Exchange Income Corp

Sound bite for Twitter and StockTwits is: Price reasonable to expensive. I personally would not be interested in buy shares in this company, mainly because this company manufactures mostly airplanes. I do not like airplane companies (i.e. those in the travel business) because I do not see that they can be profitable in the longer term. See my spreadsheet on Exchange Income Corp.

I do not own this stock of Exchange Income Corp (TSX-EIF, OTC-EIFZF). One of my blogger readers suggested this stock as one to review. There was an interesting article about this stock in the G&M in May 2013. This article suggested that the company had a hefty yield with an acquisition tailwind. This article is available here.

Dividend yields are good and growth is low to moderate. The current dividend yield is 5.81% and the 5 year median dividend yield is 7.42%. The dividend growth over the past 5 and 10 years is 2.9% and 5.6%. The last dividend increase was in 2016 and it was for 4.7%.

This company used to be an income trust. They did not decrease or keep the dividends level when changing to a corporation. They are still having problems paying for the dividends from EPS. However, their Dividend Payout Ratio for EPS is getting better. The DPR for EPS for 2015 is 112%. It is expected to be around 93% in 2016 and get better from there. The DPR for CFPS is better at 46% for 2015 and with a 5 year median of 44%.

Because of the DPR for EPS, they are providing Free Cash Flow values and are using Free Cash Flow in a Dividend Payout Ratio to show that they can afford their dividends. They give a Dividend Payout Ratio for FCF of 60%. A reason to like this company is because it is a dividend growth company.

Outstanding shares have grown a lot. Their growth is at 13.7% and 26.8% per year over the past 5 and 10 years. So I would look at the per share values. It can make a difference. The Revenue growth is 27% and 30.3% per year over the past 5 and 10 years. The Revenue per Share growth is 11.6% and 2.7% per year.

The EPS and CFPS have been picking up recently and this is a good sign. EPS grew over the past 5 years at 10.5%. EPS over the past 10 years is very low at 0.8% growth. EPS good growth is due to the most recent financial year. The 5 year running average for EPS growth over the past 5 years is a decline of 4.7%. CFPS is up by 15.8% and 5.7% per year over the past 5 and 10 years.

A reason not to currently like it is that the ROE has been less than 10% every year in the past 5 years. The ROE for 2015 was 9.0% and the 5 year median is 8.6%. When it began, it was making ROEs at or above 10%, but this has not been true since 2010.

The 5 year low, median and high median Price/Earnings per Share Ratios are 18.13, 20.58 and 23.03. The corresponding 10 year values are 13.01, 15.52 and 18.03. The current P/E Ratio is 16.15 based on a stock price of $34.57 and 2016 EPS estimate of $2.14. This suggests that the stock price that is relatively reasonable and around the median.

I get a Graham Price of $27.85. The10 year low, median and high median Price/Graham Price Ratios are 0.89, 1.08 and 1.26. The current P/GP Ratio is 1.24 based on a stock price of $34.57. This suggests that the stock price is relatively reasonable but above the median.

I get a 10 year median Price/Book Value per Share Ratio of 1.57. The current P/B Ratio is 2.15 based on BVPS of $16.11 and a stock price of $34.57. The current P/B Ratio is some 37% higher than the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.

There is a problem with using the historical median dividend yield for checking relative stock price for old income trust companies as these companies will probably never hit again the dividend yields they had as income trusts.

The 10 year median P/S Ratio is 0.66. The current P/S Ratio is 1.05 based on 2016 Revenue estimates of 910M, Revenue per Share of $32.93 and a stock price of $34.57. The current P/S Ratio is some 59% higher than the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.

The 10 year median Price/Cash Flow per Share Ratio is 4.69 based on 2016 CFPS estimate of $5.56 and a stock price of $34.57. The current P/CF Ratio is some 35% higher than the 10 year median ratios. This stock price testing suggests that the stock price is relatively expensive.

When I look at analysts' recommendations, I find Strong Buy, Buy and Hold Recommendations. Most of the recommendations are a Buy and the consensus recommendation would be a Buy. The 12 month target stock price is $39.15. This implies a total return of 19.065 with 13.25% from capital gains and 5.81% from dividends.

David Milstead wrote an article on this stock in the G&M in 2014. It is still interesting because of what it points out about this company. He is certainly right about increase in debt and shares. Long Term Debt as a percentage of the Market Cap went from a ratio of 0.03 to 0.39 between 2014 and 2015. Shares between 2014 and 2015were increased by almost 23%. See what analysts are saying at Stock Chase.

I will have only one entry for this stock this year. However, I did a more complete report on this company in 2015 and you can see that report here.

The last stock I wrote about was about was Alimentation Couche-Tard Inc. (TSX-ATD.B, OTC-ANCUF)... learn more . The next stock I will write about will be ATCO Ltd. (TSX-ACO.X, OTC- ACLLF)... learn more on Monday, September 12 around 5 pm.

Exchange Income Corporation was created to invest in profitable, well-established companies with strong cash flows operating in niche markets in Canada and/or the United States and to distribute stable monthly cash dividends to its shareholders. The Company currently owns subsidiaries in two niche business segments, aviation and specialty manufacturing. Its web site is here Exchange Income Corp.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.

See my website for stocks followed and investment notes. I have three blogs. The first talks only about specific stocks and is called Investment Talk. The second one contains information on mostly investing and is called Investing Economics Mostly. My last blog is for my book reviews and it is called Non-Fiction Mostly. Follow me on Twitter or StockTwits.