Over the past 20 years Exchange Income Corp's share price has moved steadily higher, albeit with occasional bumps along the way.Cristina Gaidau/iStockPhoto / Getty Images
Sometimes income seekers find good cash flow in unusual places. Exchange Income Corp. EIF-T is an example. The company’s name tells us nothing about the business. Unless you are already familiar with it, you’d never guess it’s a Winnipeg-based mini-conglomerate that earns much of its revenue by flying passengers and freight in the Arctic.
If that doesn’t get your attention, how about this. EIC has generated a total return of 3,960 per cent since it went public in 2004. It has increased its dividend in 17 of the past 20 years, at an average rate of 5 per cent. The average annual total return to the end of 2024 was 20 per cent.
EIC is a diversified acquisition-oriented company. It focuses on two segments: Aerospace & Aviation and Manufacturing. The company uses a disciplined acquisition strategy to identify already profitable, well-established businesses that have strong management teams, generate steady cash flow, operate in niche markets, and have opportunities for organic growth.
The company is divided into two segments. Aerospace & Aviation is the largest and includes three lines of business: Essential Air Services (EAS), Aerospace, and Aircraft Sales & Leasing.
EAS is the modern-day version of the bush pilots that helped to open Canada’s north. Its companies include Calm Air International LP, CANLink Aviation Inc., Carson Air Ltd., Custom Helicopters Ltd., Keewatin Air LP, PAL Airlines Ltd., and Perimeter Aviation LP (including its operating division, Bearskin Airlines). Together, they provide medevac, passenger, charter, freight services, and auxiliary services to Canada’s north. Most of the communities served are not accessible year-round by ground transportation. The corporation also operates two flight schools, training pilots both for the company’s own airlines and for airlines around the world. This part of the business accounted for about 36 per cent of consolidated revenues in 2024.
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Aerospace provides special mission aircraft solutions primarily to governments across the globe. These services encompass mission systems design and integration, aircraft modifications, intelligence, surveillance, reconnaissance operations, software development, logistics, and in-service support. Aerospace accounts for approximately 11 per cent of revenue.
Aircraft Sales & Leasing includes aftermarket aircraft, engine and parts sales, aircraft and engine leasing, and aircraft management services. It accounted for 13 per cent of 2024 revenue.
The company’s Manufacturing segment consists of Environmental Access Solutions (EAS), Multi-Storey Window Solutions, and Precision Manufacturing & Engineering.
EAS offers clients equipment that allow them to access job sites or use heavy machinery on wet, loose, or otherwise unstable or environmentally sensitive ground. Access mats and bridges in remote areas offer a more environmentally friendly approach than the construction of temporary gravel roads and installation of culverts and water-diversion devices, which are difficult to remove and remediate and can cause cross-contamination of soil. It accounts for 10 per cent of revenue.
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Multi-Storey Window Solutions includes the design, manufacture, and installation of the exteriors of high-rise buildings which integrate residential, retail, and office spaces. EIC subsidiaries manufacture an advanced unitized window wall system, curtain wall, and railing solutions. The subsidiaries in this segment are BVGlazing Systems and Quest Window System. They account for 17 per cent of revenue.
Precision Manufacturing & Engineering provides services throughout North America in a wide variety of industries including wireless and wireline construction and maintenance; the manufacture of precision parts and components; the manufacture of portable hydronic climate control equipment; and more. The companies that provide these services include Ben Machine Products, DryAir Manufacturing Corp., Hansen Industries Ltd., LV Control Mfg. Ltd., Overlanders Manufacturing LP, Stainless Fabrication, Inc., Water Blast Manufacturing LP, and WesTower Communications Ltd. They generate 13 per cent of revenue.
At first glance, EIC looks like an ungainly mix of unrelated businesses. But its growth strategy has been effective. Over the past 20 years the share price has moved steadily higher, albeit with occasional bumps along the way. The stock took a dive in April, along with the rest of the market, but has recovered well, rising about 50 per cent since. The shares recently touched a new all-time high of $68.01.
We first recommended EIC in my Income Investor newsletter in July, 2022 at $43.71. It closed Tuesday at $66.25 for a capital gain of 51 per cent. Here is our latest update.
Exchange Income Corporation (EIF-T)
Type: Common stock
Current price: $66.25
Originally recommended: July 14/22 at $43.71
Annual payout: $2.64
Yield: 4 per cent
Risk Rating: Higher risk
Website: www.exchangeincomecorp.ca
Comments: The company recently reported the best first-quarter results in its history and reiterated its guidance for the year. Revenue was $668-million, an increase of $67-million, or 11 per cent, from the year before. Adjusted net earnings were $14-million ($0.28 per share) compared with $10-million ($0.20 per share) last year. Free cash flow was $81.5-million, up from $61.9-million last year.
During the quarter, the company announced a deal to acquire Canadian North. It provides essential passenger and cargo services to 24 remote Canadian Arctic communities in Nunavut and the Northwest Territories, from its southern gateways in Ottawa and Edmonton. It also provides dedicated charters to resource customers in northern Alberta and British Columbia. These services are delivered with a fleet of 737 jets and ATR turboprops, which are a mix of owned and leased aircraft. Canadian North has significant infrastructure with hangars in Iqaluit, Yellowknife, Ottawa, Edmonton and Calgary. The deal will be funded by the issuance of $10-million worth of EIC common shares and $195-million drawn from the company’s credit facility.
Recently, the company was in the news again with the announcement that it had reached a long-term air service agreement with the Nunavut government for the provision of medical travel, family services travel, duty travel, and less-than-load air freight for all of Nunavut. The deal is for 10 years, with an option to extend it another five.
The stock pays a monthly dividend of $0.22 a share ($2.64 per year) to yield 4 per cent at the current price.
Summary: This little-known company has shown steady growth over the years and pays a decent, sustainable dividend. The p/e ratio of 26 is on the high side but is not out of line when you consider the company’s growth history. We rate the stock as a buy, in view of its steady growth, attractive dividend and sound balance sheet.
Gordon Pape is editor and publisher of the Internet Wealth Builder and Income Investor newsletters.