This week I’d like to coddiwomple through making mistakes and staying data-dependent to gain a...
Credit Check on Equifax
05/13/2015 7:00 am EST
Our latest recommendation is one of the big three US credit reporting agencies; these firms report back when a realtor, auto dealer, or credit card company check your credit for a loan or credit card, explains Chloe Lutts Jensen, income expert and editor of Cabot Dividend Investor.
Equifax (EFX) is part of an oligopoly of three; its competitors are TransUnion (private) and Experian (traded on the London stock exchange).
The firm is riding a rising tide of demand for consumer data. One growth area is in fraud and identity protection, which has gained popularity with consumers as high-profile data breaches proliferate.
Equifax offers its own identity theft monitoring service for $17 a month and also provides data to the growing number of credit card companies and banks that offer customers free credit monitoring.
Equifax benefits directly from economic expansion as consumers apply for more mortgages, auto loans, and credit cards. And the company has diversified into more markets in recent years. For example, Equifax's Workforce Solutions unit is the largest US processor of unemployment claims.
The company has also invested heavily in its database of employment and income information, which is used by a wide variety of customers, from conventional lenders like auto dealerships to companies ensuring compliance with the Affordable Care Act.
Revenues and EPS both demonstrate consistent growth. Over the past five years, Equifax has increased revenue at an average rate of 7% per year, while boosting adjusted EPS by 13% per year (CAGR).
Free cash flow has also increased in each of the past five full years, by an average of 16% per year.
The stock gapped up in February after Equifax reported estimate-beating fourth quarter earnings including 12% year-over-year growth in adjusted EPS.
Equifax has paid dividends since 1987 and hasn't cut the dividend since 2001, earning the stock a perfect 10.0 on our Dividend Safety Rating scale.
Combined with double-digit earnings growth expected this year and next, this earns Equifax a Dividend Growth Rating of 8.3 out of 10.
The stock is still a great buy. You can buy here or try to get in on a pullback. Or consider taking a half position now and adding to it if the stock pulls back (it may not).
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