Intact Financial Corp.

On my other blog I am today writing about the Investment Reporter recent stock picks continue...

I do not own this stock of Intact Financial Corp. (TSX-IFC, OTC-IFCZF). In November 2011, the TD Bank put out a special report on the merits of dividend investing. At the end of the report they listed a number of Canadian stocks as Equity Yield ideas. This was one stock listed that I did not follow. This report is still available here.

For this company dividend growth has been good. Dividends have grown over the past 5 and 8 years at the rate of 7.3% and 13.3% per year. The biggest increase was in 2006 in the second year of dividends and they grew at 54%. The most recent increase was in 2014 and was for 9.1%.

The Dividend Payout Ratios are good with the DPR for EPS at 57% for 2013 and for CFPS at 43% for 2013. The 5 year median values are 37% for EPS and 25% for CFPS.

Total return to date over the past 5 and 10 years is at 17.85% and 12.49% per year. The portion of this total return attributable to dividends is at 3.33% and 2.91% per year. The portion of this total return attributable to capital gains is at 14.52% and 9.58% per year.

The outstanding shares have increased by 1.9% and 2.4% per year over the past 5 and 10 years. Revenue has grown nicely however; earnings and cash flow have not. However, these last two tend to fluctuate for general insurance companies.

Revenue is up by 11% and 9.5% per year over the past 5 and 10 years. Revenue per share is up by 8.9% and 9.3% per year over the past 5 and 10 years.

Earnings per Share are up by 24% and 6.8% per year over the past 5 and 10 years. However, this is a general insurance company and earnings tend to fluctuate. The problem with the 5 year figure is that exactly 5 years ago was a bad year for earnings. If you look at the 5 year running averages the 5 year EPS is down by 3.3% per year.

Cash Flow is down by 3.2% and 0% over the past 5 and 10 years. The decline using the 5 year running averages over the last 5 year the decline is less at 1.9% per year. CFPS is down by 5% and 0.5% over the past 5 and 10 years. If you use the 5 year running averages over the past 5 years, CFPS is down just 1.5% per year.

The Return on Equity was below 10% in 2013. This is the 3rd time in the last 10 years. The ROE for 2013 is at 8.7%. The 5 year median ROE is 10.7%. The ROE on Comprehensive Income was a little higher at 8.8% and with a 5 year median of 11.5%. The ROE on Comprehensive Income confirms that the earnings are probably of good quality.

The debt ratios are fine. The Liquidity Ratio is at 2.47 which is good, but Liquidity Ratio is not very important for financial firms. The Debt Ratio at 1.33 is a little low and I would like to see it at 1.50. The Leverage and Debt/Equity Ratios at 3.99 and 2.99 is a bit high but not out of line for a financial.

This company is a general insurance company and this sort of company tends to have fluctuated earnings. However, the company has no difficulty in paying their dividends as the Dividend Payout Ratios are good. It is always important what a company does over the longer term. This company has only been public for 10 years, so we have no long term track record for it. See my spreadsheet at ifc.htm.

This is the first of two parts. The second part will be posted on Thursday, July 3, 2014 and will be available here. The first part talks about the stock and the second part talks about the stock price.

Intact Financial Corporation is the largest provider of property and casualty insurance in Canada. Intact offers home, auto and business insurance through Intact Insurance, Novex Group Insurance, Belair Direct, GP Car and Home and Broker Link. Its web site is here Intact 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.

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