Is it a good company at a reasonable price? The stock price is testing as reasonable, but may be cheap because of the dividend tests. All insurance companies have had a tough time with very low interest rates and will be better with interest rates increasing. Money Sense rates this stock within its 100 Top Canadian Stocks. So, yes, I think it is a good company to have in your portfolio to give diversity to financial stocks. Even with the low interest rate problem, this company has been producing reasonable returns for its shareholders.
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 this website.
When I was updating my spreadsheet, I noticed this company is also providing, in the Management’s D & A section, Adjusted Earnings per Share (AEPS). These values only go back to 2018, and I have updated my spreadsheet for AEPS. I have been able to pick up estimates for AEPS for 2022 and 2023.
If you had invested in this company in December 2011, $1,025.31 you would have bought 39 shares at $26.29 per share. In December 2021, after 10 years you would have received $555.56 in dividends. The stock would be worth $2,822.28. Your total return would have been $3,378.38.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $26.29 | $1,025.31 | 39 | 10 | $555.56 | $2,822.82 | $3,378.38 |
The dividend yields are moderate with dividend growth moderate. The current dividend yield is moderate (2% to 4% ranges) at 3.79%. The 5, 10 and historical median dividend yields are also moderate at 3.10%, 2.89% and 2.64%. The dividends have been increasing at a moderate rate (8% to 14% ranges) at 10.5% per year over the past 5 years. The last dividend increase was for 28.9% and it was made in 2021.
The Dividend Payout Ratios (DPR) are fine. The DPR for EPS for 2021 are 27% with 5 year average at 29%. The DPR for Adjusted Earnings per Share (AEPS) for 2021 is 25% with 5 year average at 27.5%. The DPR for Cash Flow per Share for 2021 is 120% with 5 year average at 7.60%. The problem, as with a lot of Financials, there are negative cash flows. The DPR for Free Cash Flow for 2021 is non-calculable because of a negative FCF. The 5 year average is 36%.
Debt Ratios are fine. Because this is a financial stock, I am looking at Long Term Debt/Covering Assets Ratio and that is fine at 0.81. Although Liquidity Ratio is not important, I did calculate one at 1.59. 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 21 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 | 10.54% | 9.17% | 6.28% | 2.89% |
| 2011 | 10 | 7.82% | 13.98% | 10.66% | 3.33% |
| 2006 | 15 | 8.64% | 7.15% | 4.74% | 2.41% |
| 2001 | 20 | 10.17% | 8.16% | 5.83% | 2.33% |
| 2000 | 21 | 9.66% | 8.60% | 6.23% | 2.37% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 7.03, 9.19 and 11.18. The corresponding 10 year ratios are 7.24, 9.28 and 11.76. The corresponding historical ratios are 10.16, 11.47 and 13.06. The current P/E Ratio is 8.93 based on a stock price of $65.96 and EPS estimate for 2022 of $7.39. The current ratio is below 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 Graham Price of $104.67. The 10 year low, median, and high median Price/Graham Price Ratios are 0.53, 0.67 and 0.82. The current P/GP Ratio is 0.63 based on a stock price of $65.96. 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 1.07. The current P/B Ratio is 1.00 based on a current Book Value of $7,093M, Book Value per Share of $65.89 and a stock price of $65.96. The current ratio is 6.5% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I also have a Book Value per Share estimate for 2022. The P/B Ratio is 1.02 based on Book Value per Share estimate for 2022 of $64.80, Book Value of $6,975M and a stock price of $65.96. This P/B Ratio is 4.9% below 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/Cash Flow per Share Ratio of 8.64. The current P/CF Ratio is 10.35 based on Cash Flow for the last 12 months of $686M, Cash Flow per Share of $6.37 and a stock price of $65.96. The current ratio is 19.9% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get an historical median dividend yield of 2.64%. The current dividend yield is 3.79% based on dividends of $2.50 and a stock price of $65.96. The current dividend yield is 43.6% 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 of 2.89%. The current dividend yield is 3.79% based on dividends of $2.50 and a stock price of $65.96. The current dividend yield is 31% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively cheap.
The 10 year median Price/Sales (Revenue) Ratio is 0.50. The current P/S Ratio is 0.46 based on Revenue for the last 12 months of $15,307M, Revenue per Share of $142.20 and a stock price of $65.96. The current ratio is 6% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
Because this is a Life Insurance company, I got estimate for Assets Under Management (AUM) rather than for Revenue. The 10 year median Price/AUM Ratio is 0.0338. The current P/AUM Ratio is 0.0285 based on AUM estimate for 2022 of $249.5B, AUM per Share of $2,056B and a stock price of $65.96. The current ratio is 16% 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 show the stock price as cheap, but the P/S Ratio and P/AUM Ratio tests are showing the price as reasonable and below the median. All the other tests are pointing to a reasonable and below the median price. The ratios are low, but they have always been low for this stock. For example, a P/E Ratio of 8.93 is considered low (i.e., pointing to a cheap price). However, the P/E Ratios have always been low if you look at the 5 and 10 year and the historical ratios.
When I look at analysts’ recommendations, I find Strong Buy (1), Buy (7) and Hold (1). The consensus would be a Buy. The 12 month stock price is $82.56. This implies a total return of 29.11%, with 3.79% from capital gains and 3.79% from dividends based on a stock price of $65.96.
There is nothing recent on Stock Chase, but this company was a top pick at the end of 2021. Stock Chase gives it 4 stars out of 5. Money Sense Rates it a C on their Top 100 dividend dividend stocks. Joey Frenette on Motley Fool thinks you should by this stock because the P/E Ratio is a single digit. The company has reported their fourth quarterly results on Newswire. The company reports on Newswire their first quarter of 2022 results. A Simply Wall Street report on Yahoo Financial looks at the ability of this company to pay dividends. They have no warning signs for this company.
iA Financial Corp Inc is a life and health insurance company. The company operates and manages its activities according to five main reportable operating segments Individual Insurance, Individual Wealth Management, Group Insurance, Group Savings and Retirement, and US Operations. 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 be Hardwoods Distribution Inc (TSX-HDI, OTC-HDIUF) ... learn more on Monday, June 6, 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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