IGM Financial Inc 2

I would like continue to talk today about this stock (TSX-IGM) as the 2009 annual report is in and I own this stock. I bought this stock in October 2006 and I have made a return, including dividends, of 2.9% per year. However, I expect my long term returns on this stock to more inline with the growth in Total Return that occurred over the last 10 years. This growth was 11.7% per year. I am currently earning a dividend yield on my original investment of 4.4%.

I first looked at the Insiders Buying and Insiders Selling information. What I found is that early last year there was director selling of just over $11M of shares. The problem with sales, especially ones in recessions, you never know why. People often just need the money. The company is currently buying back shares on the open market, but this is partly to help mitigate the dilutive effect of stock options issued under the Corporation's stock option plan. I would be happier if they raised the dividend.

Looking at P/E ratio, I find that the 5 year average Low P/E is 13 and the 5 year average high is 18.3. I get a current P/E of 15. So this ratio would point to a reasonable stock price. I get a Graham Price of $32.93 for 2010. The current price is just over 30% more. Even looking at the stock’s low prices, the stock price is seldom at or below the Graham Price. The Stock Price has often been much higher than this from the Graham Price. The thing to remember with both these measures is that they are based partly on earnings estimates.

Looking at the Price/Book Value Ratio, I find that the current ratio of 2.57 is some 85% of the 10 year average ratio of 3.02. Also, the current dividend yield of 4.74% is higher than the 5 year average of 4.2%. By both these measures, the stock price is certainly reasonable, if not low. Also, the thing with these measures is that they are not based on estimates.

When I look at analyst’s recommendations, I find that they cover the full range of recommendations from Strong Buy to Buy to Hold to Underperform to Sell. (See my site for information on analyst ratings.) The most common recommendations are Buys and Holds. The consensus is probably a Hold. The analysts that recommend holds most often talk about recently changing their recommendations from buy to hold because of the recent climb in its stock price. Analyst with buy recommendations talk about the fact that there is still a lot of money in money market funds and this money has started to migrate into higher margin Mutual Funds.

I am a long term investor, and I intend to hold on to the shares I currently have in this stock.

This is a premier mutual fund, managed asset and personal financial services company. The company has three operating units, Investors Group, Mackenzie Financial Corporation and Investment Planning Counsel Inc. Its web site is www.igmfinancial.com/english/ . See my spreadsheet at www.spbrunner.com/stocks/igm.htm .

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website for stocks followed and investment notes. Follow me on twitter.