Wednesday, June 18, 2014

IGM Financial Inc. 2

On my other blog I am today writing about whether Canadian Banks are currently a good buy continue...

I do not own this stock of IGM Financial Inc. (TSX-IGM, OTC-IGIFF). I am following this stock because I used to own this stock. I originally bought this stock to replace AGF Management (TSX-AGF.B). IGM was known as a dividend growth stock and it was on a lot of lists of good stocks, including Mike Higgs' and Dividend Aristocrats. I sold this 2011 because I had Power Financial, of which this company is partially owned by, and I want to rationalize my portfolio.

When I look at insider trading I find only insider selling with insider selling at just $1.2M. This is a very small amount of insider selling. Not only is there stock options but there is other option type vehicles called Senior Executive Share Units, Executive Performance Share Units and Deferred Share Units.

There does seem to be a lot of outstanding stock options. However, the outstanding shares were increased by just over 1.5M shares with a book value of $66.7M and this number of shares were worth $86.8M at the end of 2013. The percentage of outstanding shares going to stock options is less than 1% of outstanding shares and this is a rather normal percentage for a company giving out stock options.

The 5 year low, median and high median Price/Earnings per Share Ratios are 12.40, 14.80 and 16.30. These are lower than the 10 year ratios which are 13.47, 15.28 and 17.20. The current P/E Ratio is 15.14 based on a stock price of $51.70 and 2014 EPS estimate of $3.36. This stock test suggests that the stock price is relatively reasonable.

I get a current Graham Price of $37.20. The 10 year low, median and high median Price/Graham Price Ratios are 1.17, 1.32 and 1.57. The current P/GP Ratio is 1.39 based on a stock price of $37.20. This stock test suggests that the stock price is relatively reasonable.

The 10 year median Price/Book Value per Share Ratio is 2.72. The current P/B Ratio is 2.82 based on a stock price of $37.20 and current PBPS of $18.31. The current P/B Ratio is just 3.8% higher than the 10 year median ratio and this stock test suggests that the stock price is relatively reasonable.

The 5 year median dividend yield is 5.02% and this is some 17% above the current dividend yield of 4.16%. This this stock test suggests that the stock price is getting relatively expensive. (Do not forget that it is desirable that the current dividend yield be higher than the 5 year median dividend yield.)

However, on an historical basis, the average dividend yield is 3.47% and this is below the current dividend yield by 20%. This stock test suggests that the stock price is relatively cheap. Also, the historical median dividend yield is even lower at 3.33% a value some 25% lower than the current dividend yield and this stock test suggests that the stock price is relatively cheap.

When I look at the analysts' recommendations I find Strong Buy, Buy and Hold recommendations. The consensus recommendation would be a Buy. The 12 month consensus stock price is $59.80 and this implies a total return of 11.93% with 4.16% from dividends and 7.77% from capital gains.

The Globe & Mail had a recent article from Jeff Young about his current picks and IGM Financial was one of them. The Sys-Con Mediasite talks about net sales and increase in Assets under Management for this company.

Most of my stock testing shows that the stock price is reasonable. On an historical dividend yield basis it is cheap. Some analysts expect to see a dividend increase for 2014 and this would make this stock a better buy. However, the company has not announced any increases and two dividends for 2014 have already been paid. See my spreadsheet at igm.htm.

This is the second of two parts. The first part was posted on Tuesday, June 17, 2014 and is available here. The first part talks about the stock and the second part talks about the stock price.

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.

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. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.

See my website for stocks followed and investment notes. Follow me on Twitter or StockTwits.

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