I do not currently own this stock (TSX-CIX). This company is not on the dividend lists that I follow. They have significantly increased their dividend over the years, but it started at a very low yield. When they became a Unit Trust in 2006, dividends were significantly increased, but these dividends proved to be unsustainable, so dividends where decreased. They changed back to a corporation in 2009 and since that time, they have been increasing their dividends.
For dividends, over the past 5 years they have raised them by an average of 9.24%. (This ignores the big dividend increases and decreases when the company was an income trust.) So, the company really has not done badly when it comes to dividends. The company paid a reasonable percentage of their cash flow in dividends in 2009 of 33%. It is expected that the payout ratio will increase significantly this year and then moderate in 2011. However, they did very well in cash flow in the first half of this year, although not quite as well as last year. Do not forget, I am picking up on expected cash flows, so these numbers can change.
When you look at growth figures, the 10 year figures are generally better than the 5 year figures. This is not surprising since a lot of a mutual fund’s fees are a percentage of the value of their mutual fund holdings. Two things happen in a bear market for Mutual Funds. One is the value of their holdings go down because the market is down. The other thing is that people tend to pull their funds out because of the bear market. It is also harder to make sales in a bear market.
So the increase in sales and earnings for this company for the past 5 years is acceptable at just over 4% per year. The 10 year growth in earnings is at 32% per year and a lot better than the 17% per year growth for sales over the same period. When I look at the Return on Equity, I find that it has been good for the last 5 years. The ROE for 2009 was 15.2% and the ROE for the first half of this year is still good at 10.3%.
What I do not like about this company is the low Liquidity Ratio, which averages over the last 5 years at 0.88. It is a different story when you look at the Asset/Liability Ratios. The A/L ratio is very good at an average of 2.01 and a current ratio of 2.16. What is good about this company is that when you look at Total Return, it is about 12% per year for the last 5 years and about 22% per year for the last 10 years. The portion of the total return for dividends is around 6% per year. However, dividend yields in the future will be lower than over the past 5 years. Dividend yields on corporations are not as high as on Income Trust companies.
You often hear that it is more profitable to buy shares in a Mutual Fund company than to put your money than in their mutual funds. This is because the Mutual Fund companies get to keep their fees no matter what the stock market does. If you put money into a mutual fund that has 2% management fees, they will get this fee even if you lose money on your mutual fund money. This is one reason why I do not personally buy mutual funds.
Another reason I do not buy mutual funds is that in a bear market, people tend to pull their money from their mutual funds and this forces the fund managers to sell stock at inopportune times. They also pile money into mutual funds when the market is rising, and the fund manager has to buy stocks in a rising market. This can lead to the fund manager being force to buy high and sell low. This is not what he should be doing. Even if you do not behave this way, when other people do, it affects the profitability of the mutual fund.
This is a good stock and I will continue to follow it. However, I currently have enough exposure to the mutual fund industry though my investments in banks and insurance companies.
CI Financial Corp. is a diversified wealth management firm and one of Canada’s largest investment fund companies. CI is an Independent and Canadian-owned company. This company promotes and manages mutual funds and other investment products through its wholly-owned subsidiaries of CI Investments Inc., and Assante Wealth Management. CI became a public company in June 1994. It was then listed on the Toronto Stock Exchange. They because an Income Trust in 2006 and effective January 1, 2009, CI converted back to a corporation. Its web site is here CI Financial. See my spreadsheet at cix.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.
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