It's not so much the $37 sticker price on its stock that makes Olympia Financial Group seem out of place on the TSX Venture Exchange. It's the company's dividend - first, the fact that there is one, and second, the fact that, at $2.60 a year, the dividend alone is bigger than the vast majority of stock prices on the junior market.
That Olympia chooses to make its home on the venture exchange is a testament to how it runs its business: simply and economically. Among the benefits of operating on the venture exchange are lower fees than on the Toronto Stock Exchange.
This is a stock that is easy to overlook but has potential. Olympia provides financial services to small companies through four lines of business.
One markets and administers health and dental plans for small businesses. Olympia's revenues consist of a 10-per-cent markup on the cost of those administrative services. This is the most mature of Olympia's lines of business and its earnings are growing at a 20-per-cent clip.
Another subsidiary manages registered plans such as RRSPs for clients' employees. Olympia handles 60,000 accounts, all of them in Western Canada. This unit is also growing nicely - the advent of tax-free savings accounts helps a lot. Olympia earns a one-time set-up fee as well as annual fees for each account, so this subsidiary generates a steady stream of recurring revenue with which to pay dividends.
Olympia's third line of work is its stock transfer business, which manages the paperwork involved in being a publicly traded company, such as keeping track of who owns each share.
This business also cranks out recurring and sticky revenues. Olympia has 800 client companies, ranging in market capitalization from a few million dollars to more than a billion. Once it lands a transfer customer it generally doesn't lose it, and chief executive officer Rick Skauge tells me he figures Olympia won about 20 per cent of the initial public offerings in Canada so far this year.
Finally, there's the foreign exchange business, which is going gangbusters. The primary customers, again, are small businesses. Olympia's advantage here is that it's a trust company, so it can offer a high level of security to customers.
Olympia, with a market cap of only $85-million, is a small player serving those companies that big banks and firms ignore. It's done an excellent job of it, with compound annual returns including reinvested dividends of more than 19 per cent a year over the past four years.
So what's not to like? When you first look at the profit-and-loss figures you'll probably raise an eyebrow at the amount of money that executives are paid. Salaries, management fees and bonuses were $12.1-million in the first nine months of this year, while revenue during that same period was $27.1-million.
Mr. Skauge is unrepentant about the big paydays. "I get paid a lot but I'm an entrepreneur and I want to get paid like one, through profits. My shareholders don't seem to mind."
It's hard to argue with that, especially as Olympia keeps giving back cash to shareholders. (The dividend just went up 30 per cent.) And the company is still growing.
The biggest immediate avenue for expansion is an application with the Office of the Superintendent of Financial Institutions for a charter that would allow Olympia to do registered-plan business in Ontario, expanding that operation beyond Western Canada. The charter should come soon, Mr. Skauge says, although "I've been saying that for four years."
Adding a province of 13 million people - more than a third of the country's population - to its market should boost business nicely and go a long way toward funding bigger dividends.
A dividend machine
Growth by business segment for the first nine months of 2010:
Health insurance: 23%
Custodial services: 30%
Registered plans: 82%
Foreign exchange: 250%
Total (deducting corporate costs): 7%
Source: Company reports