Two under-the-radar Canadian income stocks

Up in the air and down on the ground

Sometimes income seekers find good cash flow in unusual places. Sometimes you’ll find it up in the air, at other times firmly on the ground. Two successful Canadian companies fill the bill, and income-seeking investors might take a closer look at these under-the-radar stocks, originally recommended in my Income Investor newsletter.

Up in the air

Exchange Income Corp. (TSX: EIF) is in fact 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% since it went public in 2004. It has increased its dividend in 17 of the past 20 years, at an average rate of 5%. The average annual total return to the end of 2024 was 20%.

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.

Its Aerospace & Aviation division is the largest and includes three lines of business.

• Essential Air Services is the modern-day version of the bush pilots that helped to open Canada’s north, operating medevac, passenger, charter, freight services, and auxiliary services to Canada’s north. This part of the business accounted for about 36% of consolidated revenues in 2024.
• Aerospace division 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% of revenue.
• Aircraft Sales & Leasing includes aftermarket aircraft, engine and parts sales, aircraft and engine leasing, and aircraft management services. It accounted for 13% of 2024 revenue.

The company’s Manufacturing segment consists of three divisions:

• Environmental Access Solutions offers clients equipment that allow them to access job sites or use heavy machinery on wet, loose, or otherwise unstable or environmentally sensitive ground
• Multi-Storey Window Solutions includes the design, manufacture, and installation of the exteriors of high-rise buildings.
• Precision Manufacturing & Engineering provides services throughout North America in a wide variety of industries including wireless and wireline construction and maintenance.

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% since. The shares recently touched a new all-time high of $75.13.

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%, 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.

The stock pays a monthly dividend of $0.22 a share ($2.64 per year) to yield 4% at the current price. 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. The stock would be of interest to income investors in view of its steady growth, attractive dividend, and sound balance sheet.

Down on the ground

Given the onerous 50% tariffs Donald Trump has placed on U.S. steel and aluminum imports, you’d think that this is a terrible time to be in the metals business in Canada.

But not everyone in the industry seems to be suffering. Russel Metals Inc. (TSX: RUS) is holding up surprisingly well. The company distributes steel products and conducts business in three principal business segments: metals service centers; energy field stores; and steel distributors.

True, the share price hasn’t budged much from the start of the year, closing on Sept. 16 at $41.34. But the dividend is an attractive and sustainable 4.3%. And the second-quarter results released earlier this month were impressive.

The company reported revenue of $1.2 billion for the three months to the end of June. That was up 3% from the first quarter and the highest level since mid-2022.

Net earnings were $60.4 million ($1.07 per share), a big jump from $49.9 million ($0.84 a share) in the same quarter of 2024. For the first six months of the year, Russel posted net earnings of $103.4 million ($1.82 per share), up from $99.6 million ($1.66 per share) in 2024.

Why the big improvement in the numbers? Believe it or not, much of the gain was due to Mr. Trump’s high tariffs. As many economists predicted, metals producers and distributors raised prices when foreign imports become more costly. Russel has operations in both Canada and the U.S.

The company said that as of June 30, the prices for steel plate and sheet were up 33% and 28% respectively from Dec. 31 levels. The aluminum mid-west price was up 28%. Management noted that the price for steel had moderated since then and cautioned that future steel prices may be impacted by any changes in the tariff structure – always a possibility with Mr. Trump.

In the meantime, income-seeking investors are enjoying the rewards. The company raised its quarterly dividend by a penny in May to $0.43 a share ($1.72 a year), to yield 4.3%. The last time Russel cut its dividend was during the Great Financial Crisis of 2007-09.

The company is also buying back shares. It purchased and cancelled 500,000 common shares in the second quarter at an average price of $42.11 for a total cost of $22 million. Since August 2022, when the normal course issuer bid was established, Russel has bought 7.7 million shares, or about 12% of its then outstanding shares. The average cost was $37.61 for a total outlay of $288 million.

The company says it will renew its bid this month. It is seeking approval from the TSX to purchase up to 5.5 million shares, representing 10% of the current public float, over a 12-month period.

This is not the type of company we normally recommend for income-seeking investors, but Russel Metals has a long history of maximizing shareholder value.

Gordon Pape is one of Canada’s best-known personal finance commentators and investment experts. He is the publisher of The Internet Wealth Builder and The Income Investor newsletters, which are available through the Building Wealth website.

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Notes and Disclaimer

Content © 2025 by Gordon Pape Enterprises. All rights reserved. Reprinted with permission. The foregoing is for general information purposes only and is the opinion of the writer. Securities mentioned carry risk of loss, and no guarantee of performance is made or implied. This information is not intended to provide specific personalized advice including, without limitation, investment, financial, legal, accounting, or tax advice. Always seek advice from your own financial advisor before making investment decisions.

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