Launched in 2015, Decisive Dividend Corp. is in the business of acquiring private manufacturing businesses with enterprise values up to $25 million and helping bring them to scale while skimming off a pretty handsome dividend stream for shareholders.
The stock: For years, clever financiers have tried to capture the statistically superior returns of private equity in a publicly traded security accessible to ordinary investors—that is, without the minimum investment thresholds, high fees and lock-in periods. Their efforts have been met with mixed results. For the odd success stories like Onex Corp., Brookfield and Fairfax Financial, there was the wave of SPACs (special purpose acquisition companies) that mostly fizzled under the weight of hype and adverse financial conditions in 2021 and ’22. One small B.C. conglomerate seems to have survived the carnage and unlocked a winning formula, however: Kelowna-based Decisive Dividend Corp. (TSXV:DE).
The drivers: Launched in 2015, Decisive is in the business of acquiring private manufacturing businesses with enterprise values up to $25 million and helping bring them to scale while skimming off a pretty handsome dividend stream for shareholders. Its holdings include fireplace brands Blaze King and ACR Heat Products, irrigation equipment maker Slimline Manufacturing, industrial suppliers Hawk Machine Works, Northside Industries and Unicast, and Marketing Impact, a printer of branded merchandise and store displays.
In contrast to the usual private equity formula, so far Decisive hasn’t sold any of its businesses, claiming to be in it for the long term. That’s not a bad reputation to have among the many baby-boomer entrepreneurs out there looking to retire but wanting to preserve their employees’ jobs.
The pandemic certainly challenged the business model. Sales stalled and profits turned to losses in 2020; the divy got cut and the stock sank to $1.20. But Decisive proved resilient. Earnings rebounded beginning in 2021, the payout to shareholders is now fully restored (its yield stands at 6.4 percent) and the stock price, at $5.80 as of Tuesday, is probing all-time highs. Last week Decisive was named to the TSX Venture 50 for 2022, representing the year’s best performers on the junior exchange. Investors should keep in mind, though, it’s still a micro-cap with sales of $84.3 million over the last four quarters and a market capitalization of $87 million.
Word on the street: “We expect the company to grow in value as it continues to execute accretive transactions and believe that the stock’s relative obscurity is an opportunity for investors to build a position ahead of potentially broader institutional interest,” Ty Collin of Eight Capital wrote in a research report this week. The sole analyst covering Decisive, Collin gave it a “buy” recommendation and $10 price target.
Coming & going: Sigma Lithium Corp. stock (TSXV, NASDAQ:SGML) surged 21 percent on Feb. 20 following a Bloomberg News report that electric carmaker Tesla (NASDAQ:TSLA) is mulling taking over the Vancouver-based junior miner. This follows General Motors’ US$650-million investment in Lithium Americas Corp. (TSX:LAC), also based in Vancouver, announced Jan. 31. Lithium is a key raw material in the manufacture of electric vehicle batteries and future supplies are looking inadequate to meet consumer demand.