IGM Financial Inc

I do not own this stock (TSX-IGM), but I used to. I held this stock from 2006 to 2011. I made 3.1% per year. Of this total return, 4.2% came from dividends. I had a capital loss of 1.1% per year. I sold because I wanted to rationalize my portfolio. This company is part of Power Financial (TSX-PWF), which I also hold. I sold what I had in this company to buy more Power Financial.

I did my sell and buy just after both IGM and Power Financial had a drop in price. Stock prices are relative. If you do a sell and buy in a low market you may sell at a low price, but you also buy at a low price. This is often better in absolute terms.

Over the past 5 years this stock has not performed well for stockowners. However, the 10 year return is quite good. So, over the past 5 and 10 years this stock’s total return was 2.16% and 10.37% per year. The dividend portion of this return was 4.22% and 4.63% per year, respectively. There was a capital gains loss over the past 5 years of 2.07% per year. There was a capital gain over the past 10 years of 5.74% per year. Over the past 10 years the dividends were 44% of the total return.

Dividend increases over the past 5 and 10 years are good at 6.47% per year and 11.14% per year, respectively. As the economy has slowed down, dividend increases have also slowed down. The last dividend increase, which occurred in 2011, was just 4.9%. This increase was after 2 years of no increases.

The 5 year median Dividend Payout Ratios are 72% and 69% for earnings and cash flow. The 10 year median DPRs are 54% and 63% for earnings and cash flow. These DPR peaked in 2008 and 2009 and have treaded down a bit. However, the DPR for earnings is expected to rise a bit this your to 74%. This will have to be moderated down a bit over the next few years.

Over the past 5 and 10 years the outstanding shares for this stock has decreased slightly (less than 1% per year). The company is buying back shares at a slightly higher rate than it is issuing for stock options. Because of the decreasing shares, this makes the per share value look better. For example, Revenue has increased by 1% and 4.4% per year over the past 5 and 10 years. Revenue per share has increased by 1.6% and 4.6% per year over the past 5 and 10 years.

The Earnings per Share have been a bit better in growth with the EPS growing at the rate of 3.7% and 10% per year over the past 5 and 10 years. Cash Flow per share has grown about the same with CFPS growth at 3.7 and 9.9% per year over the past 5 and 10 years. Book Value per share has grown at the rate of 3.2% and 6.7% per year over the past 5 and 10 years.

EPS did not meet analysts’ expectation in the 2nd quarter of June 2012 and EPS estimates have been treading downward. The 12 month stock price consensus has also been treading downward.

The Return on Equity at the end of 2011 was 21% with the 5 year median value at 17.7%. These are both great values. However, the ROE for last 12 months earnings is a bit lower at 19.7%. This is still a good figure, but it is lower.

Lately the ROE based on comprehensive income is around 80% lower than the ROE based on net income. At the end of 2011 the ROE based on comprehensive income was 16.8%. The ROE based comprehensive income over the past 12 months is 15.6%. The comparable figures on a year to date bases for net income and comprehensive income are 17.1% and 16.3%. The ROE on net income is down some more, but ROE on comprehensive income is up a bit.

The good range for ROE is 10% to 15%. So in fact the ROE is good, just not as good as in past years.

The current Liquidity Ratio is 2.80. This is expected for this sort of company as they do not have that much in the way of current assets or current liabilities. They also have quite a strong cash flow. The current Debt Ratio is 1.63, which is also a good. The current Leverage and Debt/Equity Ratios are moderate at 2.68 and 1.65.

This company is in a current tough business of mutual fund and wealth management. I think that it has always been a good company and it is currently paying a very good 5.5% dividend. However, all is not well with the world economy and I would expect that dividend increases will be lower in the future. (I think that this would be true for a lot of stock companies.)

I think that the return on this company will continue to be modest.

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. IGM Financial Inc. is a member of the Power Financial Corporation group of companies. Its web site is here IGM Financial. See my spreadsheet at 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.