The growth potential is similar in the defense & security industry as many countries are increasing their spending in these categories. While the company enjoys a strong core based on these two sectors, it is currently expanding its services through healthcare training.
The beauty of CAE’s business model is that training is never over. There are always new methods, processes and technologies to learn and master. Therefore, the company is sitting on an almost infinite source of recurring revenues. The company can use its reputation and expertise to expand into other training markets. By using its strong cash flows, it can buy other businesses in the same field such as Bombardier’s Aviation Training business (closed in 2019). This is a great way to add recurring business to its model with little risk.
While CAE offers a low yield, you can expect a high single digit to double-digit dividend growth each year. You will rarely see such a great business model with such strong growth potential for the next decade.