Cormark Securities analyst David Tyerman initiated coverage Exchange Income Corp. (EIF-T) is “designed to deliver safe dividend growth,” said Cormark Securities analyst David Tyerman.
He initiated coverage of the Winnipeg-based company, which is focused on opportunities in aerospace and aviation services and equipment, and manufacturing, with a “buy” rating.
“EIC has increased its dividend 12 times since its first dividend in June 2004, raising the dividend at a 5.8-per-cent annual rate (106 per cent total) to the current 17.5 cents per month rate (7.2-per-cent annual yield) and without a single decrease,” said Mr. Tyerman. “EIC has achieved this by building a diversified business portfolio focused on aviation, aerospace and manufacturing assets. Growth is driven through acquisition and organic sources. The Company focuses on businesses with low volatility and low cross-correlation. EIC also seeks to protect and grow the dividend by maintaining prudent financial leverage and payout ratios.”
Mr. Tyerman believes additional growth is “baked in,” expecting to see returns on recent “large organic invested capital deployment.”
The analyst set a price target of $40 for the stock. Consensus is $44.70.
“We recommend investors buyEIC shares to benefit from EIC’s attractive dividend yield and EPS and dividend growth potential,” he said. “EIC’s $2.10 annualized dividend (paid monthly) yields 7.2 per cent at the Company’s current share price. We estimate EIC will increase its dividend by an average of 6.4 per cent per year and its EPS by 7.1 per cent per year from 2016 to 2019. We also think the stock is undervalued. We believe the combination of good EPS growth, a moderate valuation multiple bump and solid and growing dividends should generate an attractive 44.6-per-cent investment return over the next year. We expect continued good investment upside beyond the next year from the same factors.”