Intact Financial Corp.

Sound bite for Twitter and StockTwits is: Dividend growth insurance company. This company has done well by its shareholders. It will never have high growth but will supply its shareholders will long term solid growth. See my spreadsheet at ifc.htm.

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.

Also in a column by John Heinzl dated December 2013 he gave five dividend growth stocks to buy and hold. He liked the following stocks: Bank of Nova Scotia (BNS); TransCanada (TRP); Intact Financial (IFC); Saputo (SAP); and Canadian Natural Resources (CNQ) He said these stocks had blue chip value of a solid balance sheet; an attractive valuation; a leadership position in the industry; above-average profitability; and long-term earnings and dividend growth.

This stock has a moderate dividend yield and lately moderate dividend growth. The current dividend yield is 2.37% based on a stock price of $89.37. The 5 year median dividend yield is 2.77%. The dividend growth is at 8.5% and 12.8% per year over the past 5 and 9 years. The last dividend increase was in 2015 and it was for 10.4%. This company went public in December 2004 and since then has raised the dividend every year.

The Dividend Payout Ratios are good. The DPR for EPS for 2014 was 33.2% and the CFPS was 22.5%. The 5 year DPR for EPS was 37.3% and for CFPS was 28.5%. Similar results are expected for 2015.

If you had held this stock for 5 or 10 years, dividends paid would cover some 20.1% and 36.1% respectively of the cost of a stock purchased at a median stock price. If you had held this stock for 5 or 10 years and had paid a median stock price, you would be earning a dividend yield on the original stock cost of 4.8% and 5.1% respectively.

The 5 and 10 year total return to date is at 14.70% and 7.91% per year. The portion of this total return attributable to dividends is 2.77% and 2.19% per year. The portion of this total return attributable to capital gains is 7.91% and 5.72% per year.

The outstanding shares have increased by 1.9% and 2.4% per year over the past 5 and 10 years. The shares have increased due to stock issues and decreased due to Buy Backs. Revenues growth is moderate to good. Earnings and cash flow growth is non-existent to good.

Revenue has grown at 11.7% and 7.6% per year over the past 5 and 10 years. Revenue per Share has grown at 9.7% and 7.4% per year over the past 5 and 10 years. Analysts expect growth in Net Premiums at 8.4% for 2015. However, if you compare the 12 months to the end of 2014 with the 12 months to the end of the first quarter, the growth in Net Premiums is less than 1%.

The growth in EPS is 40.4% over the past 5 years. Over the past 10 years, EPS is down by 1.1%. The main problem is EPS is volatile. This is a general insurance company and EPS will probably always be volatile. If you look at 5 year running averages, the growth in EPS is 4.3% and 1.1% per year over the past 5 and 8 years. This is probably a better reflection of EPS growth.

Analysts expect EPS to growth at 7.9% in 2015. If you compare the 12 months to the end of 2014 with the 12 months to the end of the first quarter, the growth in EPS is less than 2.6%.

Cash flow has grown at 12.95% over the past 5 years and has declined by 1% over the past 10 years. CFPS has grown by 10.9% per year over the past 5 years and has declined by 1.1% over the past 10 years. Cash Flow is also rather volatile. If you look at CFPS 5 year running average, CFPS has grown by 3.6% and 3% per year over the past 5 and 7 years.

Analysts expect cash flow to drop by some 37% in 2015. If you compare the 12 months to the end of 2014 with the 12 months to the end of the first quarter, Cash Flow has dropped 5.2%.

The Return on Equity has been below 10% 3 times in the last 10 years and once in the last 5 years. The ROE for 2014 was 14.3% with a 5 year median of 12%. The ROE on comprehensive income for 2014 was 14.4% and the 5 year median value is 11.5%. The close ROE on comprehensive income would suggest that the earnings are of good quality.

Debt ratios are fine, but could be better. This is a financial company and they all tend to have lower Debt Ratios and higher Leverage and Debt/Equity Ratios than other sorts of companies. The Liquidity Ratio is good at 2.01, but Liquidity Ratios is not of much importance to financial companies. The Debt Ratio of 1.36 is fine. The Leverage and Debt/Equity Ratios are also fine at 3.77 and 2.77, respectively.

This is the first of two parts. The second part will be posted on Friday, July 10, 2015 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 BrokerLink. Its web site is here Husky.

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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