Is it a good company at a reasonable price? The stock price is probably reasonable. I would not currently buy this stock because I like dividend growth stocks and this is not one. However, if you are holding it, it is giving off a high yield. Some analysts like safe and high yielding stocks which this probably is. I prefer a low to median yield and dividend growth.
I do not own this stock of IGM Financial Inc (TSX-IGM, OTC-IGIFF). I am following this stock because I used to own this stock. The stock was on Mike Higgs' list of dividend growth stocks and on the other Dividend lists at that time. I sold with a very low return in 2011.
When I was updating my spreadsheet, I noticed that the bad thing about this stock is lack of dividend growth. There is has been no dividend growth since 2013. The good thing is the high dividend yield.
If you had invested in this company in December 2011, $1105.75 you would have bought 25 shares at $41.60 per share. In December 2021, after 10 years you would have received $555 in dividends. The stock would be worth $1,140.50. Your total return would have been $1,695.50.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $41.60 | $1,105.75 | 25 | 10 | $555.00 | $1,140.50 | $1,695.50 |
The dividend yields are good with dividend growth flat. The current dividend yield is good (5% and 6%) at 5.03%. The 5 and 10 year median dividend yields are also good at 6.00% and 5.77%. The historical median dividend yield is moderate at 3.59%. The dividends stopped growing in 2013. However, the analysts now think that dividends will again be raised in 2023. However, analysts also thought that in 2020 and it did not happen. Of course, we had a pandemic in the meantime.
The Dividend Payout Ratios (DPR) are a little high. The DPR for EPS for 2021 is 55% with 5 year coverage at 70%. The DPR for Cash Flow per Share for 2021 was 55% with 5 year coverage at 72%. These rates are too high and I prefer them to be at 40% or less. The DPR for Free Cash Flow for 2021 is 62% with 5 year coverage at 78%.
Debt Ratios are fine. This is a financial stock, so I also look at if they have assets to cover investing liabilities. The Liabilities/Covering Assets Ratio is good at 0.63. The Long Term Debt/Market Cap Ratio is also good 0.19. Although the Liquidity Ratio is not important for financials, I did calculate it to be 2.60 and that is good. The Debt Ratio is good at 1.58. The Leverage and Debt/Equity Ratios are 2.72 and 1.72 and are fine.
The Total Return per year is shown below for years of 5 to 31 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 | 0.00% | 9.13% | 3.61% | 5.51% |
| 2011 | 10 | 0.69% | 5.25% | 0.31% | 4.94% |
| 2006 | 15 | 2.58% | 3.97% | -0.49% | 4.46% |
| 2001 | 20 | 5.79% | 8.42% | 2.99% | 5.43% |
| 1996 | 25 | 9.19% | 10.68% | 4.99% | 5.69% |
| 1991 | 30 | 10.94% | 13.73% | 7.42% | 6.31% |
| 1990 | 31 | 10.57% | 16.50% | 8.96% | 7.53% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 9.53, 11.38 and 12.80. The corresponding 10 year ratios are 10.35, 12.42 and 14.71. The corresponding historical ratios are 13.45, 5.36 and 17.63. The current ratio is 10.05 based on a stock price of $44.72 and EPS estimate for 2022 of $4.45. The current ratio is below the low of the 10 year median ratios. This stock price testing suggests that the stock price is relatively cheap.
I get a Graham Price of $45.01. The 10 year low, median, and high median Price/Graham Price Ratios are 0.89, 1.07 and 1.27. The current P/GP Ratio is 0.99 based on a stock price of $44.72. The current ratio is between the low and median values of 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 2.11. The current P/B Ratio is 2.21 based on a Book Value of $4,842M, Book Value per Share 20.24 and a stock price of $44.72. The current P/B Ratio is 5% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median.
There is an analyst estimate for the Book Value per Share for 2022. With the Value per Share estimate I get a P/B Ratio of 1.53 based on the Book Value per Share estimate for 2022 is $29.30 Book Value of $7012M and Stock price of $44.72. This P/B Ratio is 28% below the 10 year median ratio. With the estimates for BVPS they give older BVPS and I agree with the ones prior to 2019 and they do not give a BVPS for 2021.
I get a 10 year median Price/Cash Flow per Share Ratio of 13.50. The current P/CF Ratio is 11.59 based on Cash Flow per Share estimate of $3.86, Cash Flow of $924M and a stock price of $44.72. The current ratio is 14% 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 3.59%. The current dividend yield is 5.03% based on a stock price of $44.72 and dividends of $2.25. The current dividend yield is 40% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively cheap.
I get an historical median dividend yield of 5.77%. The current dividend yield is 5.03% based on a stock price of $44.72 and dividends of $2.25. The current dividend yield is 6% 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 3.02. The current P/S Ratio is 2.92 based on a stock price of $44.72, Revenue estimate for 2022 of $3,663M and Revenue per Share of $15.31. The current P/S Ratio is 3% 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 and below the median. The P/S Ratio test shows this. However, dividend yield tests work better on dividend growth stocks. Testing shows the stock price from cheap to reasonable but above the median.
When I look at analysts’ recommendations, I find Strong Buy (2), Buy (2), Hold (3) and Underperform (1). The consensus is a Buy. The 12 month stock price consensus is $55.50. This implies a total return of 29.14% with 24.11% from capital gains and 5.03% from dividends based on a stock price of $44.72.
When I looked at analysts’ recommendations last year, I found Strong Buy (2), Buy (1), Hold (5), and Underperform (1). The consensus is a Buy. The 12 month stock price consensus was $38.83. This implied a total return of 16.90% with 10.50% from capital gains and 6.40% from dividends based on a stock price of $35.14. What happened was a total return of 33.60% with 27.26% from capital gains and 6.40% from dividends based on the stock price increasing from $35.14 to $44.72. So, results were underestimated.
What I said last year was that the results of stock price testing were 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.
On the analysts’ comments I can see on Stock Chase for this stock, the two recommendations for 2021 are buys. A site called Advisor’s Edge comments on this stock. Adam Othman on Motley Fool says invest for a passive income stream. . .
IGM 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. IGM has two main operating divisions--asset management (operated through Mackenzie Investments) and wealth management (via its Investors Group Wealth Management and Investment Planning Counsel subsidiaries) -- that provide investment management products and services. 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. learn more on Wednesday, March 09, 2022 around 5 pm. Tomorrow on my other blog I will write about Dividend Stocks March 2022 .... learn more on Wednesday, March 08, 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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