Goeasy Ltd’s (TSX—GSY) poor year-to-date performance surprised us because goeasy achieved record earnings in the three months to March 31. Specifically it earned $45.8 million, or $2.72 a share. This was up by 16 per cent from earnings of $36.7 million, or $2.34 a share, a year earlier.
Goeasy provides non-prime leasing and lending services through its easyhome, easyfinancial and LendCare brands. The company offers a wide variety of financial products and services including unsecured and secured installment loans.
Customers can transact seamlessly through an omni-channel model that includes an online and mobile platform, over 400 locations across Canada, and point-of-sale financing offered in the retail, power sports, automotive, home improvement and healthcare verticals, through more than 4,000 merchants across Canada.
Throughout the Company’s history, it has acquired and organically served over 1.1 million Canadians and originated over $8.2 billion in loans, with one in three easyfinancial customers graduating to prime credit and 60 per cent increasing their credit score within 12 months of borrowing.
Goeasy’s rising dividends are sustainable
In addition to record profits, goeasy raised its dividend for the eighth year in a row, to $3.64 a share. That is, it remains a dividend aristocrat. In Canada, that refers to companies that have raised their dividends for at least five consecutive years. Goeasy provides an attractive dividend yield of 3.2 per cent.
Sometimes, attractive dividend yields can signal the danger of a dividend cut. However, goeasy’s dividends are sustainable. In 2022, its earnings are expected to climb by 13 per cent to $11.79 a share. Next year, the company’s earnings growth is expected to accelerate by 23.7 per cent, to $14.59 a share. This greatly exceeds goeasy’s dividend.
Goeasy does well even in difficult times
Despite a potential economic slowdown, or an outright recession, goeasy remains optimistic about its outlook. President and Chief Executive Officer Jason Mullins said. “Our long track record of performing during periods of both economic strength and weakness and the proven resiliency of the non-prime lending model, provide us confidence in the future. We now project to achieve the high-end of our loan book growth range, which is more than double the average loan book growth of the last three years.” Mr. Mullins concluded.
The fall in goeasy’s shares give them downward price momentum. At some point, however, the market is likely to take notice of the company’s improving earnings and dividends. The shares should recover in the long run if not in the short run.
This is an edited version of an article that was originally published for subscribers in the May 27, 2022 issue of The Investment Reporter. You can profit from the award-winning advice subscribers receive regularly in The Investment Reporter.
The Investment Reporter, MPL Communications Inc.
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