I do not own this stock of Intact Financial Corp (TSX-IFC, OTC-IFCZF). I am following this stock because 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 and Wajax are from TD Report on dividend investing.
When I was updating my spreadsheet, I noticed although this is a general insurance company, they have produced solid returns for its shareholders. General insurance company’s earnings tend to be more volatile than other insurance companies, like life insurance companies.
The dividend yields are moderate with dividend growth moderate. The current dividend yield is moderate (2% to 4% ranges) at 2.31%. The 5, 10 and historical dividend yields are also moderate at 2.55%, 2.59% and 2.64%. The current dividend growth is moderate (8% to 14% ranges) at 9.4% per year over the past 5 years. The last dividend increase was for 9.2% and it was done in 2020.
The Dividend Payout Ratios (DPR) are fine. The DPR for EPS for 2020 is 46% with 5 year coverage at 52%. The DPR for CFPS for 2020 is 27% with 5 year coverage at 33%. The DPR for Free Cash Flow is 22% with 5 year coverage at 35%.
Debt Ratios are fine. The Long Term Debt/Market Cap Ratio for 2020 is 0.62. The Liquidity Ratio is 1.46. If you add in Cash Flow after dividends it is 2.02. The Debt Ratio is a little low at 1.38 and I prefer this to be at 1.50 or higher. The Leverage and Debt/Equity Ratios are a little high at 3.66 and 2.66. However, the Debt Ratio, Leverage Ratio and Debt/Equity Ratio have been consistent over time.
The Total Return per year is shown below for years of 5 to 16 to the end of 2020. 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. |
|---|---|---|---|---|---|
| 2015 | 5 | 9.39% | 13.73% | 11.19% | 2.54% |
| 2010 | 10 | 9.34% | 14.16% | 11.48% | 2.68% |
| 2005 | 15 | 11.48% | 9.57% | 7.46% | 2.11% |
| 2004 | 16 | 10.25% | 13.47% | 10.78% | 2.70% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 19.25, 20.96 and 22.58. The corresponding 10 year ratios are 15.96, 17.94 and 20.35. The corresponding historical ratios are 15.06, 17.19 and 18.46. The current P/E Ratio is 18.15 based on a stock price of $143.91 and EPS estimate for 2021 of $7.93. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get a Graham Price of $103.31. The 10 year low, median, and high median Price/Graham Price Ratios are 1.17, 1.31 and 1.42. The current P/GP Ratio is 1.39 based on a stock price of $143.91. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get a 10 year median Price/Book Value per Share Ratio of 2.07. The current P/B Ratio is 2.41 based on a Book Value of $8,555M, Book Value per Share of $58.92 and a stock price of $143.91. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get a 10 year median Price/Cash Flow per Share Ratio of 13.11. The current P/CF Ratio is 8.75 based on last 12 months of cash flow of $2,352M, Cash Flow per Share of $12.15 and a stock price of $143.91. The current ratio is 33% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap. However, cash flow has been volatile and it was up some 82% in 2020. You have to wonder how sustainable it is at this level.
I get an historical median dividend yield of 2.59%. The current dividend yield is 2.31% based on dividends of $3.32 and a stock price of $143.91. The current dividend yield is 11% below the 10 year median dividend yield. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get a 10 year median dividend yield of 2.64%. The current dividend yield is 2.31% based on dividends of $3.32 and a stock price of $143.91. The current dividend yield is 13% below the historical median dividend yield. This stock price testing suggests that the stock price is relatively reasonable but above the median.
The 10 year median Price/Sales (Revenue) Ratio is 1.53. The current P/S Ratio is 1.28 based on Revenue estimate for 2021 of $16,113M, Revenue per Share of $112.66 and a stock price of $143.91. The current ratio is 18% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
Analyst expect Revenues to climb 43% in 2021 and another 29% in 2022. This is probably as a result of them buying Canada, UK, and international operations of London's RSA Insurance Group PLC. However, they only expect EPS to rise 10% in 2021 and another 13% in 2022. So, I do wonder about the Revenue estimates.
With past estimate, in June 2019 analysts expect Revenue of $10,130M in 2019 and Revenue came in at 10,275M. In February 2020, analysts expected Revenue to come in at $11,600M in 2020 and Revenue came in at $11,241. So, analysts have not been far off in the past.
Results of stock price testing is that the stock price is probably reasonable. Both the Dividend Yield tests say that the stock is reasonable but above the median. For the P/S Ratio test, the result was that the stock price is relatively reasonable and below the median. However, a number of the tests show the stock price as reasonable, but above median. You have to wonder about it being a bit on the expensive side.
Is it a good company at a reasonable price? The stock price could be reasonable. I know that the stock price I am using is rather low but the stock price has been volatile lately and I use the one posted when I am writing. However, for the dividend yield tests to show the stock as expensive, the price would have to be at least at $159.00.
When I look at analysts’ recommendations, I find Strong Buy (4) and Buy (6). The consensus would be a Buy. The 12 month stock price consensus is $180.60. This implies a total return of 27.80% with 25.50% from capital gains and 2.31% from dividends.
Analysts on Stock Chase like this stock. Vineet Kulkarni on Motley Fool says this company’s consistent dividend growth since 2005 make it attractive. The Executive Summary on Simply Wall Street gives it 4 stars out of 5 and one risk factor. A writer onSimply Wall Street talks about the earnings not growing at all, which is untrue. This is a general insurance company, so EPS will fluctuate. However, EPS is growing slower than Revenue. The Blogger Dividend Earner has recently reviewed this stock.
Intact Financial Corp is a property and casualty insurance company that provides written premiums in Canada. The company distributes insurance under the Intact Insurance brand through a network of brokers and a wholly owned subsidiary, BrokerLink, and directly to consumers through belairdirect. Its web site is here Intact Financial Corp.
The last stock I wrote about was about was Allied Properties Real Estate Investment Trust (TSX-AP.UN, OTC-APYRF) ... learn more. The next stock I will write about will be Manulife Financial Corp (TSX-MFC, NYSE-MFC) ... learn more on Friday, February 19, 2021 around 5 pm. Tomorrow on my other blog I will write about Beardstown Ladies.... learn more on Thursday, February 18, 2021 around 5 pm.
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. I have three blogs. The first talks only about specific stocks and is called Investment Talk. The second one contains information on mostly investing and is called Investing Economics Mostly. My last blog is for my book reviews and it is called Non-Fiction Mostly. Follow me on Twitter or StockTwits. I am on Instagram. Or you can just Google #walktoronto spbrunner8166 to see my pictures.
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