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.
When I was updating my spreadsheet, I noticed there was no dividend increase in 2017. They have been paying dividends for 13 years and there has been 4 years with no increases. However, dividends have grown and this is not bad considering that the company used to be an income trust. A lot of income trusts have lower dividends now than in the past. This is because income trust can payout more in dividends than corporations.
The stock used to be an income trust, so dividend yield is high. Also note they are now paying dividends, not distribution (and most of the dividends are eligible dividends).. The current yield is 6.90%. The 5, 10 and historical yields are 7.18%, 7.42% and 7.98%. The yield since 2011 when they became a corporation is 7.18%. This historical high yield is around 18.6%.
Even though the yields are high, this company has been growing their dividends. Most old income trust cut their dividends or kept them flat. The dividend growth is shown in the table below. They have not increased their dividend every year, for example, they were not increased in 2017. The last dividend increase was this year and it was for 4.3%.
It has taken them awhile to be able to cover their dividends with their earnings, but they managed to do that in 2016. It looks like in the future this will not be a problem. Note that old income trust companies did have a few years to adjust to a lower rate of payout. This company’s DPR for CFPS was in the 40% range from 2014. The DPR for CFPS in 2017 was 37% with 5 year coverage at 44%.
The Long Term Debt/Market Cap Ratio for 2017 was good at 0.49. The Liquidity Ratio for 2017 is 1.91 with 5 year median at 1.93. The debt Ratio for 2017 is 1.49 with 5 year median ratio at 1.52. I like these to be at 1.50 or higher. Leverage and Debt/Equity Ratios for 2017 are somewhat high at 3.03 and 2.03 with 5 year median at 2.53 and 1.53.
The Total Return per year is show below for years of 5 to 14. Under the Capital Gain column is the portion of the Total Return attributable to capital gains. Under the Dividend column is the portion of the Total Return attributable to dividends. See charts below.
As you can see from the chart below, shareholders have done well, but the total return is dropping. Part of the drop is lower dividend yields, but capital gain has also dropped.
|Years||Div. Gth||Tot Ret||Cap Gain||Div.|
The 5 year low, median, and high median Price/Earnings per Share Ratios are 12.52, 15.72 and 21.27. The corresponding 10 year median ratios are 13.66, 16.59 and 20.89. The corresponding historical median ratios are 12.06, 15.44 and 18.40. The current P/E Ratio is 11.84 based on a current Price of $31.74 and 2018 EPS estimate of $2.68. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a Graham Price of $33.14. The 10 year low, median, and high median Price/Graham Price Ratios are 0.89. 1.15 and 1.39. The current P/GP Ratio is 0.96. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a 10 year median Price/Book Value per Share Ratio of 1.68. The current P/B Ratio is 1.74 based on Book Value of $575.93, Book Value per Share of $18.21 and a stock price of $31.74. The current ratio is some 4% above the 10 year median. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get an historical median dividend yield of 7.98% and one from 2011 at 7.18%. The current dividend yield is 6.90% based on dividends of $2.19 and a stock price of $31.74. The current dividend is some 14% below the historical median and 4% below the median from 2011. This stock price testing suggests that the stock price is relatively reasonable but above the median.
The 10 year median Price/Sales (Revenue) Ratio is 0.91. The current P/S Ratio is 0.85 based on 2018 Revenue estimate of $1,170M, Revenue per Share of $37.13 and a stock price of $31.74. The current ratio is some 6.5% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
When I look at analysts’ recommendations I find Strong Buy (3), Buy (7) and Hold (2). The consensus recommendation would be a Buy. The 12 month stock price is $44.25. This implies a total return of 46.31% with 39.41% from capital gains and 6.90% from dividends.
With this stock, the dividend yield test is probably not the best one. The rest are showing that the stock price is relatively reasonable but above the median except for the P/B Ratio test and here the current ratio is not much above the median.
Demetris Afxentiou of Motley Fool really likes this company. North Channel Investments on Seeking Alpha also likes this company and gives a good coverage of it.. John Woods of Post Media on the Winnipeg Free Press admires this company and their acquisition growth plan. Terence Corcoran on Financial Post does not believe the short sellers claims. See what analysts are saying about this company on Stock Chase.
Exchange Income Corp is Canadian diversified, acquisition-oriented corporation focused on opportunities in two sectors, aviation services and equipment, and manufacturing. Its web site is here Exchange Income Corp.
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 Friday, September 7, 2018 around 5 pm. Tomorrow on my other blog I will Something to Buy September 2018.... learn more on Thursday, September 6, 2018 around 5 pm.
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