Is it a good company at a reasonable price? The stock price is reasonable. Shareholders have mostly done fine with this stock. The dividend is good at 4.96%, but for this company it is about the lowest it has been. I will suspect the yield will go down in the future as this company used to be an Income Trust and Income Trust used to have higher dividend yields than corporations. Dividend growth has been low as there is a trade off between yield and growth for dividends.
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 now behind a paywall. This article is available here.
When I was updating my spreadsheet, I noticed Revenue estimates for 2022 and 2023 have greatly increased in 2022. Last year, the Revenue estimates for 2022 and 2023 were $1,567, and $1,704. This year they are $2,002 and $2,249. But EPS has not changed that much as they went from $2.87, and $3.69 for 2022 and 2023 to $2.80 and $4.25.
If you had invested in this company in December 2011, $1,016.40 you would have bought 40 shares at $25.41 per share. In December 2021, after 10 years you would have received $792.70 in dividends. The stock would be worth $1,685.60. Your total return would have been $2,478.30.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $25.41 | $1,016.40 | 40 | 10 | $792.70 | $1,685.60 | $2,478.30 |
The dividend yields are moderate with dividend growth low. The current dividend yield is moderate (2% to 4% ranges) at 4.96%. The 5 and 10 year dividend yields are good (5% to 6% ranges) at 6.16% and 6.67%. The historical dividend yield is high (7% or higher) at 7.42%. On July 28, 2009 the company changed from an income trust to a corporation. Income Trust had much higher dividend yields than corporations.
The Dividend Payout Ratios (DPR) probably will be fine. The DPR for EPS for 2021 is 127% with 5 year coverage at 116%. Analysts expect this to drop to 84% in 2022 and 56% in 2023. The DPR for Adjusted Earnings per Share (AEPS) for 2021 is 101% with 5 year coverage at 102%. Analyst expect this to drop to 72% in 2022 and 53% in 2024. The DPR for Cash Flow per Share (CFPS) is 33% with 5 year coverage also at 33%. The DPR for Free Cash Flow (FCF) is 49% with 5 year coverage at 59%.
I would like to see the Debt Ratios improved. The Long Term Debt/Market Cap Ratio for 2021 is 0.67. It is a little high. The Liquidity Ratio for 2021 is 1.47. If you add in cash flow after dividends it is 1.89. I prefer this ratio be 1.50 or higher. The Debt Ratio is low at 1.45, but it is normal for this company. I prefer this to be 1.50 or higher. The Leverage and Debt/Equity Ratios are too high at 3.23 and 2.23. These are also normal for this company, but I prefer them to be less than 3.00 and 2.00.
The Total Return per year is shown below for years of 5 to 18 to the end of 2021. 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 chart below.
| From | Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|---|
| 2016 | 5 | 2.86% | 5.45% | 0.19% | 5.26% |
| 2011 | 10 | 3.61% | 11.37% | 5.19% | 6.18% |
| 2006 | 15 | 4.14% | 16.74% | 8.10% | 8.64% |
| 2003 | 18 | 8.84% | 34.63% | 14.56% | 20.07% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are 12.04, 15.07 and 18.54. The corresponding 10 year ratios are 15.32, 18.15 and 22.15. The corresponding historical ratios are 12.28, 15.44 and 18.48. The current P/E Ratio is 17.29 based on a stock price of $48.40 and EPS estimate for 2022 of $2.80. The current ratio is between the low and median ratios of the 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I have Adjusted Earnings per Share data. The 5-year low, median, and high median Price/Earnings per Share Ratios are 10.62, 13.79 and 16.97. The corresponding 10 year ratios are 10.80, 16.04 and 19.74. The current P/AEPS Ratio is 14.89 based on AEPS estimate for 2022 of $3.25 and a stock price of $48.40. The current ratio is between the low and median ratio of the 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I also have Free Cash Flow per Share data for the company. The 5-year low, median, and high median Price/Earnings per Share Ratios are 7.33, 9.56 and 12.85. The corresponding 10 year ratios are 8.08, 10.73 and 13.36. The current P/FCF Ratio for 2022 is 10.61 based on a stock price of $48.40 and FCF per Share for 2022 of $4.56. The current ratio is between the low and median ratio of the 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a Graham Price of $35.93. The 10-year low, median, and high median Price/Graham Price Ratios are 0.87, 1.25 and 1.54. The current P/GP Ratio is 1.35 based on a stock price of $48.40. The current P/GP Ratio is between the median and high ratios of the 10 year median ratios. This stock price testing 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 1.80. The current P/B Ratio is 2.36 based on a Book Value of $818M, Book Value per Share of $20.49 and a stock price of $48.40. The current ratio is 31% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
I get a 10-year median Price/Cash Flow per Share Ratio of 5.75. The current P/CF Ratio is 8.12 based on a Cash Flow for the last 12 months of $237.8M, Cash Flow per Share of $5.96 and a stock price of $48.40. The current ratio is 41% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
I get an historical median dividend yield of 7.42%. The current dividend yield is 4.96% based on a dividend of $2.40 and a stock price of $48.40. The current dividend yield is 33% below the historical median dividend yield. This stock price testing suggests that the stock price is relatively expensive.
I get an historical median dividend yield of 6.67%. The current dividend yield is 4.96% based on a dividend of $2.40 and a stock price of $48.40. The current dividend yield is 26% below the historical median dividend yield. This stock price testing suggests that the stock price is relatively expensive.
The 10-year median Price/Sales (Revenue) Ratio is 1.04. The current P/S Ratio is 0.96 based on Revenue estimate for 2022 of $2,002M, Revenue per Share of $50.17 and a stock price of $48.40. The current ratio is 7% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
Results of stock price testing is that the stock price is probably reasonable. This is what the P/S Ratio testing is showing. The problem with the Dividend Yield tests is that this company used to be an Income Trust and Income Trust companies have high dividend yields. Current dividend yields would be more normal. Both the P/E Ratio and P/AEPS Ratio tests say that the stock price is reasonable.
When I look at analysts’ recommendations, I find Strong Buy (3) and Buy (3). The consensus would be a Strong Buy. The 12 month stock price consensus is $61.43. This implies a total return of 31.88% with 26.92% from capital gains and 4.96% from dividends based on a stock price of $48.40.
Analysts on Stock Chase seem to like to stock. Stock Chase gives this stock 4 stars out of 5. Money Sense gives this stock a C grade. Demetris Afxentiou on Motley Fool says it is a well-diversified business that generates cash and pays out a juicy monthly dividend. Jitendra Parashar on Motley Fool talks about this stock going down 6% a day after the company announced a bought deal share offering. The Fourth Quarter results of 2021 is announced via Business Wire on Yahoo Finance. The Second Quarter results of 2022 is announced via Business Wire on Yahoo Finance.
A Simply Wall Street report on Yahoo Finance talks about . Simply Wall Street puts out 3 warnings of interest payments are not well covered by earnings; dividend of 5.22% is not well covered by earnings or forecast to be in the next 3 years and shareholders have been diluted in the past year.
Exchange Income Corp is a diversified acquisition-oriented corporation focused on opportunities in two sectors, aerospace, aviation services and equipment, and manufacturing. The business plan of the corporation is to invest in profitable, well-established companies with strong cash flows operating in niche markets. 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 Monday, August 29, 2022 around 5 pm.
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