Aimia Inc. (TSX:AIM) is Canada’s largest customer loyalty company, owning the rights to Aeroplan. It also owns similar companies in the U.K., Middle East, Asia, and the United States.
Aimia shares are down approximately 35% over the last year, primarily because of Canada’s weak consumer numbers. With household debt hitting record levels, customers just aren’t opening up their wallets.
But there’s still plenty to be positive about. From an earnings perspective, Aimia consistently posts negative numbers. But the company also has large amortization costs. Free cash flow is much more healthy. Management predicts the company will earn between $190 and $210 million in free cash flow, which works out to between $1.25 and $1.38 per share.
Dividends are $0.80 annually, giving Aimia a worst-case payout ratio of 64%..
The company has also been spending some of its cash hoard to buy back undervalued shares. At the end of June, 2015, there were 163.7 million shares outstanding. That’s been decreased to 152.3 million. And with close to $400 million in cash, Aimia could very easily continue with the share repurchases.
Aimia should also benefit from increasing interest rates. The company has $267 million invested in long-term bonds, cash that has been used to purchase miles that haven’t been redeemed. As rates go up and that stash of cash keeps getting bigger, more interest will flow to the bottom line.
