I do not own this stock of IA Financial Corp (TSX-IAG, OTC-IDLLF). This was a stock shown as a dividend growth stock on the Canadian All Star List. See site here.
When I was updating my spreadsheet, I noticed that this stock has not recovered from the March 2020 bear. It is still some 2% below the December 2019 stock price.
The dividend yields are moderate with dividend growth is moderate. The current dividend yield is moderate (2% to 4% ranges) at 2.78%. The 5, 10 and historical dividend yields are also moderate at 3.06%, 2.80% and 2.60%. The dividend increases have been moderate (8% to 14% ranges) over the past 5 years are 10.8% per year. The last dividend increase was lower at 7.8% in 2020. There has been no increase this year yet.
The Dividend Payout Ratios (DPR) are good. The DPR for EPS for 2020 is 34% with 5 year coverage at 29%. The DPR for CFPS for 2020 is 11% with 5 year coverage at 27%. The DPR for Free Cash Flow for 2020 is 12% with 5 year coverage at 34%.
Debt Ratios are good. Because this is a financial, I am looking for asset coverage the long term debt. The Debt/Asset coverage for 2020 is 0.82. The Liquidity Ratio is not important for financials, but I get one of 2.08. The Debt Ratio is 1.08 and this is fine for a financial.
The Total Return per year is shown below for years of 5 to 20 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 | 10.83% | 7.84% | 4.57% | 3.27% |
| 2010 | 10 | 7.07% | 7.02% | 4.13% | 2.88% |
| 2005 | 15 | 9.46% | 7.19% | 4.37% | 2.82% |
| 2000 | 20 | 9.78% | 7.71% | 5.12% | 2.59% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 7.01, 9.19 and 11.18. The corresponding 10 year ratios are 8.13, 10.37 and 12.51. The corresponding historical ratios are 10.21, 11.49 and 13.25. The current P/E Ratio is 10.01 based on a stock price of $69.87 and EPS estimate for 2021 of 6.89. The current ratio is below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
If you look at P/E Ratios compared to Total Returns for the 5, 10, 15, and 20 year periods, I find the following. For example, total return over the past 10 years is 7.02% per year, the starting P/E Ratio (the one from 15 years ago) was 12.31. From the point of view of this chart, a P/E Ratio of 10.01 would be fine.
| Year | Tot Return | Start P/E |
|---|---|---|
| 5 | 7.84% | 12.36 |
| 10 | 7.02% | 12.31 |
| 15 | 7.19% | 17.62 |
| 20 | 7.71% | 16.73 |
I get a Graham Price of $98.66. The 10 year low, median, and high median Price/Graham Price Ratios are 0.56, 071 and 0.83. The current P/GP Ratio is 0.71 based on a stock price of $69.87. The current ratio is the same as the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a 10 year median Price/Book Value per Share Ratio of 1.10. The current P/B Ratio is 1.13 based on a Book Value of $6,636M, Book Value per Share of $61.98 and a stock price of $69.87. The current ratio is 3% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I am not doing a Price/Cash Flow test because of negative cash flows.
I get an historical median dividend yield of 2.60%. The current dividend yield is 2.78% based on dividend of $1.94 and a stock price of $69.87. The current dividend yield is 6.8% 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 2.80%. The current dividend yield is 2.78% based on dividend of $1.94 and a stock price of $69.87. The current dividend yield is 1% below the 10 year 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 0.53. The current P/S Ratio is 0.48 based on Revenue estimate for 2021 of $15,632M, Revenue per Share of $146.01 and a stock price of $69.87. The current ratio is 9% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
Results of stock price testing is that the stock price is probably reasonable. The dividend yield tests put the stock price above and below the median. The P/S Ratio tests says the stock price is below the median. The rest of the testing is showing the stock price is reasonable and above and below the median.
Is it a good company at a reasonable price? The stock price is probably reasonable. Considering it is a life insurance company, it has not done badly with most total return in the 7% ranges. All the life insurance companies have done poorly with low interest rates. When interest rates return to normal, they will do better.
When I look at analysts’ recommendations, I find Strong Buy (2) and Buy (6). The consensus would be a Buy. The 12 month stock price consensus is $80.88. This implies a total return of 18.53% with 15.76% from capital gains and 2.78% from dividends.
Surprisingly this stock is not well covered at Stock Chase. Last entries in 2020, where analysts liked the stock. Joey Frenette on Motley Fool thinks this stock is due for a pull back. The executive summary on Simply Wall Street gives this stock 4 stars out of 5 and one risk. For this sort of financials, the long term debt must be covered by assets and this is the important one for their long term debt. A writer on Simply Wall Street likes that the company is growing its earnings.
IA Financial Corp is a life and health insurance company. It offers life and health insurance products, savings and retirement plans, mutual funds, securities, auto and home insurance, mortgages, and others. It operates in Canada and US. Its web site is here IA Financial Corp.
The last stock I wrote about was about was Ritchie Bros Auctioneers Inc (TSX-RBA, NYSE-RBA) ... learn more. The next stock I will write about will Hardwoods Distribution Inc (TSX-HDI, OTC-HDIUF) ... learn more on Friday, June 04, 2021 around 5 pm. Tomorrow on my other blog I will write about Tomorrow on my other blog I will write about Something to Buy June 2021.... learn more on Thursday, June 3, 2021 around 5 pm.
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