Tuesday, April 13, 2010

IGM Financial Inc

I would like today to talk 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%.

This stock is on the dividend lists that I follow of Dividend Achievers and Dividend Aristocrats (see indices). A lot of companies where kicked off these lists this year because of no dividend increases for 2009. This company did not actually increase their dividends in 2009, but I have a fairly minimal increase in dividends received of 2.5% for 2009 because the 2008 increase was done half-way through the year. This stock’s 5 and 10 year growth in dividends is 12% and 15% respectively.

This company did not have a very good year in 2009 as revenue and earnings were down from that achieved in 2008. However, the good news is that since I reviewed this stock in April of last year, everyone has increased the estimates for earnings and cash flow for 2010. These estimates are even higher for 2011. I guess the bad news is that the 2009 earnings came in below the estimates. I got estimates for 2009 of $2.35 and the earnings were $2.12.

The return on equity for this stock was lower at 12.6% than it has been for some years. However, this is still a fairly good ROE. The 5 year average ROE of $18.2% is a good figure indeed. One of the good things about this stock is the strong balance sheet. The Asset/Liabilities Ratio is at 2.05. Any A/L Ratio of 1.50 and above is good.

I, of course, will be holding on to the shares I own. This stock has a long term average dividend over 3% and this is a good dividend yield. Some recent studies in the US show that stocks that provide yields between 2.5% and 4.5% provide the best long term returns.

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.

No comments:

Post a Comment