I do not own this stock of CI Financial Corp (TSX-CIX, OTC-CIFAF). I started to follow this stock originally because it was a Mutual Fund company. People talked about it being easier to make money from buying a Mutual Fund company than buying Mutual Funds. When they became a Unit Trust in 2006, dividends were significantly increased, but these dividends proved to be unsustainable. They changed back to a corporation in 2009 and dividends were decreased in 2010. Since that time, they have been increasing their dividends since 2011. In June 2014, MPL communications called this stock a Buy and advised that they were adding it to their list of Key Stock for the Investment reporter.
When I was updating my spreadsheet, I noticed they have been buying back a lot of shares over the past two years. In 2018 they bought just over 10% of the outstanding shares and in 2019 they bought just over 9% of the outstanding shares. In 2019 they used 80% of their cash flow to do the repurchase of shares. In 2018, they used mostly debt to financial the share repurchases. They went into debt again in the first quarter to fund share repurchases.
Insiders were selling until the bear market. They started to buy under $18, and stop when stock went back up to around $13. There has been no recent insider buying or selling.
The dividend yields are moderate to good with dividend growth non-existent. The current dividend is moderate (2% to 4% ranges) at 4.18% with the 5, 10 and historical median yields at 4.77%, 4.03% and 3.59%. In the last few years, this stock’s dividends have often been good (5% to 6% ranges) with dividends being in the 5% range. They decreased the dividends by over 48% in 2018. The dividend has not changed since then and analysts do not expect any change in the near future.
The Dividend Payout Ratios (DPR) are currently fine. The DPR for EPS for 2019 was 31% with 5 year coverage 57%. The DPR for CFPS for 2019 is 27% with 5 year coverage at 48%. The DPR for Free Cash Flow for 2019 is 32% with 5 year coverage at 53%. The Dividend Coverage Ratio for 2019 is 3.17 and the 5 year one is 1.90.
Debt Ratios are fine, but I think it is the wrong time to run up debt. The Long Term Debt/Market Cap Ratio for 2019 is 0.24. The current one is 0.35 because of increasing debt and decreasing market cap (stock price). The Liquidity Ratio for 2019 is 0.70. If you add in cash flow after dividends it is just 1.04. If you add back in the current portion of long term debt and cash flow after dividends it is 1.69. The Debt Ratio is 1.52. The Leverage and Debt/Equity Ratios for 2019 are 2.91 and 1.91.
The Total Return per year is shown below for years of 5 to 25 to the end of 2019. Under the Capital Gain column is the portion of the Total Return attributable to capital gains. Under the Dividend column is the portion of the Total Return attributable to dividends. See chart below.
|From||Years||Div. Gth||Tot Ret||Cap Gain||Div.|
The 5 year low, median, and high median Price/Earnings per Share Ratios are 12.75, 14.74 and 15.75. The corresponding 10 year ratios are 14.66, 16.45 and 18.23. The corresponding historical ratios are 15.31, 17.55 and 19.98. The current P/E Ratio is 8.13 based on a stock price of $17.24 and EPS estimate for 2020 of $2.12. This stock price testing suggests that the stock price is relatively cheap.
I get a Graham Price of $18.07. The 10 year low, median, and high median Price/Graham Price Ratios are 1.48, 1.67 and 1.88. The current P/GP Ratio is 0.95 based on stock price of $17.24. This stock price testing suggests that the stock price is relatively cheap.
I get a 10 year median Price/Book Value per Share Ratio of 3.92. The current P/B Ratio is 2.52 based on a Book Value of $1477M, Book Value per Share of $6.85 and a stock price of $17.24. The current ratio is 36% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
I get a 10 year median Price/Cash Flow per Share Ratio of 11.89. The current P/CF Ratio is 6.34 based on CFPS estimate for 2020 of $2.81, Cash Flow of $609M and a stock price of $17.24. The current ratio is 48% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
I get an historical median dividend yield of 3.59%. The current dividend yield is 4.18% based on a stock price of $17.24 and dividends of $0.72. The current yield is 16% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a 10 year median dividend yield of 4.03%. The current dividend yield is 4.18% based on a stock price of $17.24 and dividends of $0.72. The current yield is 3% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively reasonable and below the median.
The 10 year median Price/Sales (Revenue) Ratio is 4.13. The current P/S Ratio is 1.95 based on 2020 Revenue estimate of $1,913M, Revenue per Share of $8.83 and a stock price of $17.24. The current ratio is 53% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
Results of stock price testing is that the stock price is probably reasonable and below the median. The dividend yield testing is showing the stock price as reasonable and below the median. Dividends are set because of what management feels about the future. The dividends were cut in 2018 which shows management is, at least in the short term, expecting hard times.
The P/S Ratio tests shows that the stock price is cheap, so at least this confirms the dividend yield testing. As far as I can see, there are no problems with any of the stock price tests. All the tests but the dividend yield tests show the stock price as cheap.
Is it a good company at a reasonable price? I do not like share buybacks at the best of times. This company is going into debt to do share buybacks. I think this is a terrible idea. I think there are probably better companies to buy at this time.
When I look at analysts’ recommendations, I find Strong Buy (1), Buy (2), Hold (4), Underperform (1). The consensus would be a Hold. The 12 month stock price is $17.25. This implies a total return of 4.23% with 0.06% from capital gains and 4.18% from dividends.
A couple of analysts on Stock Chase say that Mutual Fund companies are not as good of business as they used to be. Aditya Raghunath on Motley Fool likes this company because it has been making acquisitions and partnerships. The company announces on Newswire the selling of new debt securities. There are few articles after 2018 and few analysts’ articles after 2018, the year the company cut their dividends by almost half. This shows that analysts have lost interest in this stock.
CI Financial is a diversified provider of wealth management products and services, primarily in the Canadian market. The company operates primarily through CI Investments, which offers a broad selection of investment funds, and Assante Wealth Management, which provides financial advice through a network of advisors. Other subsidiaries include Sentry Investments, Stonegate Private Counsel, Grant Samuel Funds Management (Australia), First Asset Investment Management and BBS Securities. Its web site is here CI Financial Corp.
The last stock I wrote about was about was Algonquin Power & Utilities Corp (TSX-AQN, NTSE-AQN) ... learn more. The next stock I will write about will be Computer Modelling Group Ltd (TSX-CMG, OTC-CMDXF) ... learn more on Wednesday, June 24, 2020 around 5 pm. Tomorrow on my other blog I will write about Extendicare Inc.... learn more on Tuesday, June 23, 2020 around 5 pm.
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