Exchange Income Corp (EIF.TO)
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I own it. I was looking for a stock to diversify my current holdings. I like the business and it has good dividend. It seems to have been beaten up a little bit over the last few months but the overall consensus from analysts appear to be positive. Looks like a decent entry point.
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802 Posts
This is a concern. How do they fund it? I havent really looked into EIF but I have seen plenty of high yielding stocks where they seem to be able to maintain a good payout by issuing new stock and debt. I am probably guilty of currently owning a couple like that and I have owned some in the past.
I'm not sure how they are covering the dividend but the adviser I spoke with had informed me that the dividend was sustainable and that the expected payout ratio was around 70-80% (2013). The dividend history looks decent - growing over time. I'll have to do a little research into the payout ratio, etc.
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247 Posts
you should be looking at payout ratio as % of free cash, not eps
OK, and what is AFFO payout?
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802 Posts
OK. So I buy a business that is paying me all it's free cash flow. That's fantastic. :biggrin: But what happens when that business wants to acquire another business or they need to replace some plant or equipment. :hopelessness:
I have a couple of solutions. They can issue more stock or issue some debt. This can continue for a while but eventually will have to stop. It just depends where we get in on the cycle. It's not all doom and gloom but we must be cautious.
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May be OK for small portion of stock portfolio, as in ~1%.
According to the 2012 Annual Report, the free cash flow less maintenance capital expenditures payout ratio was 71% (80% fully diluted), and the 2012 payout ratios for free cash flow was 43% (54% fully diluted).
Yeah, maybe ... considering that it close to 52 weeks low and forward P/E represents 6% discount to its 5-y average....
The stock with similar ticker - ENF has better fundamentals
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802 Posts
Purchased some ENF today. Quite like the look of it. Now I just need to find some money to buy some POT whilst it's going cheapYeah, maybe ... considering that it close to 52 weeks low and forward P/E represents 6% discount to its 5-y average....
The stock with similar ticker - ENF has better fundamentals
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7,252 Posts
There is this guy that I know....
Perhaps based on free cash flow. Their free cash flow less maintenance capex payout ratio was 81% (Q2 - 2013), up from 66% in 2012. I would prefer to see that number below 70%.
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802 Posts
On the basis of these new results I've done a bit of research tonight.
I like the fact that since 2008 the gross profit has increased at a an annualised rate of 28% and the Operational costs have only grown at 20%. It's pleasing to me to see the costs increasing below the rate of the earnings increase. However, for me, this is where the fun stopped.
What I don't like is that they have been we now have 370% more stock in issue than 2008. That's new stock at a rate of 30% per year. We also have a growth in debt of 509% or annualised at 38.5%
Book value is around $12.50
So from what I can see the eps doesn't really matter to the company as they can pay the dividend from free cash and then just issue more stock and debt for the capex.
There is no denying the above strategy has worked for them but can it continue to do so?
What really concerns me is the long term liability growth outpacing the profit growth. Then we have all the talk of interest rates rising. If rates rise are they going to issue debt to continue expansion? If not where will the growth come from?
I think it can serve it's purpose as an income play but with the current threat of rates rising I would like to see the valuation drop as such I'm going to sit on the sidelines for the time being.
Any thoughts on the above?
I used the June 1/4 statement for figures with exception of the gross profit figure which I used Morningstar for. On a gross profit per share basis there has been a 7% overall decline. The figure was $8.96 per share in 2008 compared to roughly $8.32 TTM
Please don't base an investment decision on any of my views. Always do your own research.
I like the fact that since 2008 the gross profit has increased at a an annualised rate of 28% and the Operational costs have only grown at 20%. It's pleasing to me to see the costs increasing below the rate of the earnings increase. However, for me, this is where the fun stopped.
What I don't like is that they have been we now have 370% more stock in issue than 2008. That's new stock at a rate of 30% per year. We also have a growth in debt of 509% or annualised at 38.5%
Book value is around $12.50
So from what I can see the eps doesn't really matter to the company as they can pay the dividend from free cash and then just issue more stock and debt for the capex.
There is no denying the above strategy has worked for them but can it continue to do so?
What really concerns me is the long term liability growth outpacing the profit growth. Then we have all the talk of interest rates rising. If rates rise are they going to issue debt to continue expansion? If not where will the growth come from?
I think it can serve it's purpose as an income play but with the current threat of rates rising I would like to see the valuation drop as such I'm going to sit on the sidelines for the time being.
Any thoughts on the above?
I used the June 1/4 statement for figures with exception of the gross profit figure which I used Morningstar for. On a gross profit per share basis there has been a 7% overall decline. The figure was $8.96 per share in 2008 compared to roughly $8.32 TTM
Please don't base an investment decision on any of my views. Always do your own research.
EIF taking a little beating today - courtesy of the CRA
http://www.newswire.ca/en/story/133...announces-receipt-of-cra-proposal-to-reassess
Buying opportunity?
http://www.newswire.ca/en/story/133...announces-receipt-of-cra-proposal-to-reassess
Buying opportunity?
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1,483 Posts
Exited my position this morning. Only ended up losing a couple hundred bucks on an 8k investment. Might very well buy in again down the road.... but I'm not hanging around while the CRA gets its pound of flesh from EIF....
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23,633 Posts
You should not trust advisors for these kinds of claims... they don't know what they're talking about.
Go talk to your advisor again. Ask, "how do you know the dividend is sustainable? show me on paper". Get him to show you his analysis. "Show me your work". Does he pull numbers from the cashflow statement and income statement, with a trend analysis over time, and provide best case/worst case forecasts? Can he provide numerical support for his claim?
Of course he can't, he's talking out of his ***, because he's a salesman. Don't trust what he says.
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