One thing seemingly every investor looks for today is a moat, some sort of sustainable advantage that gives a company an edge over its competitors.
Information Services Corp (TSX:ISV) goes even farther. It has a massive edge over its competition because it’s a monopoly.
The company operates the land titles registry for the province of Saskatchewan, as well as recently expanding by buying a company that deals with land titles in other provinces for lawyers, notaries, and banks.
The real prize is Saskatchewan’s land titles. It collects fees to do everything from transferring property to registering provincial corporations to registering land rights acquired by oil and gas companies. Fees are set by the government and buyers are forced to use it or not buy.
Business from the latter is down a bit year over year, but other parts of its business are steady.
Revenue in 2015 was $78.3 million compared to $80.4 million in 2014. Profits were down slightly as well, dipping from $18.4 million to $15.9 million. Still, the company maintained net profit margins of greater than 20%.
Results should be better in 2016 because of the recent acquisition of the services business.
Revenue was up more than 20% in the first quarter alone.
The company can afford to pay out much of its earnings to shareholders, leading to a yield of 4.7% with a payout ratio of less than 70% of free cash flow.
And remember those are trailing numbers. Free cash flow should increase in 2016, which could lead to a dividend increase.
