Is it a good company at a reasonable price? The price maybe reasonable and it may be a bit on the expensive side. You have to wonder when the dividend yield is below 2% and it has seldom been below 2%. This surely points to the stock being on the expensive side. It is a good company and has provided good value for its shareholders.
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 that EPS increased by 72%, Revenue by 43% and Net Premiums by 44%. One of their biggest expenses is Claims and they only increased by 30%. So, we have higher EPS because of increased revenue, and decrease in relatively claims. They recently made the acquisition of RSA Insurance group.
If you had invested in this company in December 2011, $1,053.54 you would have bought 18 shares at $58.53 per share. In December 2021, after 10 years you would have received $447.12 in dividends. The stock would be worth $2,959.56. Your total return would have been $3,406.68.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $58.53 | $1,053.54 | 18 | 10 | $447.12 | $2,959.56 | $3,406.68 |
The dividend yields are low with dividend growth low. The current dividend yield is low (below 2%) at 1.98%. The 5, 10 and historical dividend yields are moderate (2% to 4% ranges) at 2.55%, 2.56% and 2.62%. The current dividend growth is low (below 8%) at 7.94% per year over the past 5 years. The last dividend increase was moderate (8% to 14% ranges) at 9.64% and it occurred in 2021.
The Dividend Payout Ratios (DPR) are good. The DPR for EPS for 2021 is 27% with 5 year coverage at 43%. The DPR for Cash Flow per Share for 2021 is 22% with 5 year coverage at 29%. The DPR for Free Cash Flow is 17% with 5 year coverage at 28%.
Debt Ratios are fine. The Long Term Debt/Market Cap Ratio is 0.40 and is good. The Liquidity Ratio is 1.50. The Debt Ratio is low at 1.34 with 5 year median at 1.37. The Leverage and Debt/Equity Ratios are 3.95 and 2.95. This is fine.
The Total Return per year is shown below for years of 5 to 17 to the end of 2021. 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. |
|---|---|---|---|---|---|
| 2016 | 5 | 7.94% | 13.87% | 11.34% | 2.53% |
| 2011 | 10 | 8.67% | 13.48% | 10.88% | 2.59% |
| 2006 | 15 | 8.50% | 10.10% | 7.92% | 2.18% |
| 2004 | 17 | 10.89% | 13.37% | 10.68% | 2.69% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 16.00, 18.45 and 21.84. The corresponding 10 year ratios are 15.96, 17.94 and 20.35. The corresponding historical ratios are 13.98, 15.57 and 16.73. The current P/E Ratio is 18.01 based on a stock price of $183.10 and EPS estimate for 2022 of $10.20. The current ratio is between the median and high median ratios. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get a Graham Price of $142.93. 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 1.29 based on a stock price of $183.70. The current ratio is between the low and median ratios of the 10 year median ratios. 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 2.07. The current P/B Ratio is 2.06 based on a Book Value of $15,674M, Book Value per Share of $89.02 and a stock price of $183.70. The current ratio is 0.1% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and at the median.
Analysts are giving out a Book Value per Share value for 2022. The 2022 P/B Ratio is 2.08 based on a Book Value per Share of $88.50, Book Value of $15,583M, and a stock price of $183.70. The current ratio is 0.5% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and at the median.
I get a 10 year median Price/Cash Flow per Share Ratio of 12.87. The current P/CF Ratio 10.34 based on the last 12 month Cash Flow per Share of $15.71, Cash Flow of $2,767M and a stock price of $183.70. The current ratio is 19.7% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get an historical median dividend yield of 2.62%. The current dividend yield is 1.98% based on dividends of $3.64 and a stock price of $183.70. The current dividend yield is 24% below the historical median dividend yield. This stock price testing suggests that the stock price is relatively expensive.
I get an historical median dividend yield of 2.56%. The current dividend yield is 1.98% based on dividends of $3.64 and a stock price of $183.70. The current dividend yield is 22% below the historical median dividend yield. This stock price testing suggests that the stock price is relatively expensive.
The 10 year median Price/Sales (Revenue) Ratio is 1.58. The current ratio is 1.60 based on a stock price of $183.70, Revenue estimate for 2022 of $20,249M and Revenue per Share $115.00. The current ratio is 1.4% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median.
Results of stock price testing is that the stock price is the P/S Ratio is showing the price as reasonable, but the dividend yield test is showing it a bit expensive. The other tests are showing the stock price as reasonable and above and below the median.
I look at the total return over a number of years. For P/S Ratio and P/E Ratio, the lower the ratio the cheaper the stock. For yield, the higher the yield, the cheaper the stock. In the chart below you can see that the beginning P/E Ratios is not showing anything conclusive. The P/S Ratio looks ok at 1.60. The dividend yield looks a bit too low.
In the following chart the capital gains for the 10 years to December 31, 2021 is 10.88% per year. The beginning yield was at 2.53%, and the P/E Ratio and the P/S Ratio were at 14.78 and 1.55. Does this chart change my opinion of the stock price? Not really. It is showing the dividend yield as being a bit low.
| # Years | Cap Gains | Beg P/E | Beg P/S | Beg Yield |
|---|---|---|---|---|
| 5 | 11.34% | 24.21 | 1.59 | 2.41% |
| 10 | 10.88% | 14.78 | 1.55 | 2.53% |
| 15 | 7.92% | 10.65 | 1.83 | 1.91% |
| 17 | 10.68% | 4.52 | 1.12 | |
| current | 18.01 | 1.60 | 1.98% |
When I look at analysts’ recommendations, I find Strong Buy (4) and Buy (8). The consensus would be a Strong Buy. The 12 month stock price consensus is $208.33. This implies a total return of 15.39% with 13.41% from capital gains and 1.98% from dividends.
When I looked at analysts’ recommendations last year, I found Strong Buy (4) and Buy (6). The consensus was a Buy. The 12 month stock price consensus was $180.60. That implies a total return of 27.80% with 25.50% from capital gains and 2.31% from dividends based on a stock price $143.91. What happen was a stock gain to $183.70 which gave this stock a total return of 29.96% with 27.65% from capital gains and 2.31% from dividends.
Last year I said the 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.
Some analysts on Stock Chase like this stock and some do not. Kay Ng on Motley Fool likes the recent dividend increases by this company. Joey Frenette on Motley Fool thinks this is a high quality stock selling at a great price. The company has a Press Release on their fourth quarterly results. Intact Financial Corp made a Press Release about their recent acquisition of RSA Insurance group.
Intact Financial Corp is a property and casualty insurance company that provides written premiums in Canada. Most of the company's direct premiums are written in the personal automotive space. 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 Tuesday, February 22, 2022 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.
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