I do not own this stock of IGM Financial Inc (TSX-IGM, OTC-IGIFF), but my son does and I used to own it. 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 wanted to rationalize my portfolio. So, I sold this stock and bought more of Power Financial. I purposely sold at a low point to reduce taxes and do my buy at a low also.
When I was updating my spreadsheet, I noticed that this stock had a high in 2014 that it has yet to get back to as far a stock price is concerned. It was in 2015 that the last dividend increase occurred. The high in EPS was also hit around the same time and EPS has not changed much since. You can see the same pattern in Revenue also. Analysts think they will do better in 2021, but they also thought that same thing for 2020, so I guess we will see.
The dividend yields are good with dividend growth non-existent. The current dividend yield is good (5% and 6% ranges) at 6.40%. The 5 and 10 year median dividend yields are also good at 6.29% and 5.47%. The historical median dividend yield is moderate (2% to 4% ranges) at 3.52%. The last dividend increase was in 2015 an they have been flat ever since. Analysts do not expect this to change in the near future. I have statistics going back 30 years and they have raised the dividend 21 in the last 30 years.
The Dividend Payout Ratios (DPR) are fine. The DPR for EPS for 2020 is 70% with 5 year coverage at 74%. The DPR for CFPS for 2020 is 76% with 5 year coverage at 76% also. I prefer the DPR for CFPS to be 40% or lower, but this stock has always had a high DPR for CFPS. The DPR for Free Cash Flow for 2020 is 85% with 5 year coverage at 84%. However, I looked at 3 sites for the FCF and none agreed on what it was. This is a common problem with FCF.
Debt Ratios are fine, but could be improved. Long Term Debt/Market Cap Ratio for 2020 is 0.26. The Liquidity Ratio for 2020 is very good at 2.10. The Debt Ratio for 2020 is 1.46 and a bit low as I prefer this to be 1.50 or higher. The Leverage and Debt/Equity Ratios for 2020 are 3.19 and 2.19 and a bit too high as I prefer them to be under 3.00 and under 2.00, respectively.
The Total Return per year is shown below for years of 5 to 30 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 | 0.00% | 5.95% | -0.47% | 3.42% |
| 2010 | 10 | 0.94% | 3.29% | -2.28% | 5.57% |
| 2005 | 15 | 3.54% | 3.34% | -1.79% | 5.13% |
| 2000 | 20 | 6.74% | 7.40% | 1.62% | 5.77% |
| 1995 | 25 | 10.39% | 13.32% | 5.86% | 7.46% |
| 1990 | 30 | 10.94% | 16.33% | 8.26% | 8.07% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 9.96, 11.38 and 12.80. The corresponding 10 year ratios are 11.30, 13.11 and 14.91. The corresponding historical ratios are 13.60, 15.65 and 17.68. The current P/E Ratio is 9.27 based on a stock price of $35.14 and EPS estimate for 2021 of 3.79. This stock price testing suggests that the stock price is relatively cheap.
I get a Graham Price of $42.48. The 10 year low, median, and high median Price/Graham Price Ratios are 1.00, 1.18 and 1.33. The current P/GP Ratio is 0.83 based on a stock price of $35.14. 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 2.13. The current P/B Ratio is 1.66 based on a stock price of $35.14, Book Value of $5,043 and Book Value per Share of $21.16. The current ratio is 22% 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 15.18. The current P/CF Ratio is 9.10 based on Cash Flow per Share estimate for 2021 of $3.86, Cash Flow of $919.9 and a stock price of $35.14. The current P/CF Ratio is 40% 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 3.52%. The current dividend yield is 6.40 based on a stock price of $35.14 and dividends of $2.25. The current dividend yield is 82% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively cheap.
I get a 10 year median dividend yield 5.47%. The current dividend yield is 6.40 based on a stock price of $35.14 and dividends of $2.25. The current dividend yield is 17% 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 3.23. The current P/S Ratio is 2.46 based on Revenue estimate for 2021 of $3,398M, Revenue per Share of $14.26 and a stock price of $35.14. The current ratio is 24% 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 cheap. The historical dividend yield test is showing the stock price as cheap and that is confirmed by the P/S Ratio test. However, the 10 year dividend yield test is showing as reasonable and below the median. This is because the stock price fell and the dividend payment has remained the same over the past few years.
Is it a good company at a reasonable price? This is no longer a dividend growth stock. It might be again but that is unknow at the present time. If you buy this stock, you can get a very good dividend while you are waiting for a recovery. The problem is that this stock is cheap for a reason. This is Mutual Fund company and these sorts of companies are having a hard time competing with new ETF companies. TD Securities feel that the company is well positioned to compete with other wealth management companies because of their now current exposure to Fintech, Alternatives, and China AMC
When I look at analysts’ recommendations, I find Strong Buy (2), Buy (1), Hold (5), and Underperform (1). The consensus is a Buy. The 12 month stock price consensus is $38.83. This implies a total return of 16.90% with 10.50% from capital gains and 6.40% from dividends.
Analysts on Stock Chase do not care for this stock and wonder about its long term sustainability. Nikhil Kumar on Motley Fool has a more positive view of this company. The Executive Summary on Simply Wall Street gives this stock 4 stars out of 5 and one risk item. A writer on Simply Wall Street feels the company has limited earnings growth. The blogger Dividend Investors has recently reviewed this stock.
GM Financial is the largest non-bank-affiliated asset manager in Canada. The firm is part of the Power Financial group of companies, which includes Great West Life, London Life, Canada Life, and Putnam Investments. Its web site is here IGM Financial Inc.
The last stock I wrote about was about was TFI International Inc (TSX-TFII, OTC-TFIFF) ... learn more. The next stock I will write about will be Emera Inc (TSX-EMA, OTC-EMRA) ... learn more on Monday, March 8, 2021 around 5 pm.
Also, on my book blog I have put a review of the book Why Nations Fail: The Origins of Power, Prosperity and Poverty by Daron Acemoglu and James Robinson learn more...
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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