CARFINCO FINANCIAL GROUP $9.98 (Toronto symbol CFN; TSINetwork Rating: Speculative) (1-888- 486-4356; www.carfinco.com; Shares outstanding: 24.6 million; Market cap: $245.5 million; Dividend yield: 4.8%) provides car loans to consumers who aren’t able to meet the criteria of traditional lenders, like banks.
The company offers its loans through 1,459 car dealers across Canada. About 60% of its loan portfolio is in western Canada, and 40% is in eastern Canada. The company recently entered the Quebec market.
In the three months ended June 30, 2012, Carfinco’s revenue rose 22.9%, to $17.7 million from $14.4 million a year earlier. The company loaned a record $36.8 million in the latest quarter, up 31.4% from $28.0 million.
Earnings rose 26.3%, to $5.4 million, or $0.22 a share, from $4.3 million, or $0.17 a share.
The company has raised its monthly dividend by 14.3%, to $0.04 from $0.035, starting with the October 19, 2012 payment. This is Carfinco’s fourth dividend increase since the start of 2011. The higher payout gives the stock a 4.8% yield.
The company will need a steady or improving economy to maintain its growth. However, its wellestablished dealer network, its investments in Internet loan-approval technology and its experience in the higher-risk lending market should let it keep increasing its market share.
Carfinco’s stock is up 25.9% since we first recommended it in our July 2012 issue at $7.93. But the company’s outlook remains positive, and the stock trades at just 11.7 times Carfinco’s forecast 2012 earnings of $0.85 a share.
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