Is it a good company at a reasonable price? I think this stock is currently expensive because of the dividend yield tests. It is a good company and has done well for shareholders in the past. It may not be a good time to buy at present. Buying stock at a reasonable price affects long term results. Analysts seem to feel differently, but most stocks most of the time show was a buy from analysts.
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 several Canadian stocks as Equity Yield ideas. This was one stock listed that I did not follow.
When I was updating my spreadsheet, I noticed that year over year for 2021-2022, dividends went up 17.7%. This is because year over year dividend increases for 2020 and 2021 was just 2.4% and an increase for 2021 was at the end of the year.
If you had invested in this company in December 2012, for $1,036.32 you would have bought 16 shares at $64.77 per share. In December 2022, after 10 years you would have received $435.84 in dividends. The stock would be worth $3,118.56. Your total return would have been $3,554.40.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $64.77 | $1,036.32 | 16 | 10 | $435.84 | $3,118.56 | $3,554.40 |
The dividend yields are low with dividend growth moderate. 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 2.50%, 2.55% and 2.59%. The dividend increases are moderate (8% to 14% ranges) at 9.3% per year over the past 5 years. The last dividend increase was in 2022 and it was for 9.9%.
The Dividend Payout Ratios (DPR) are fine. The DPR for EPS for 2022 is 30% with 5 year coverage at 39%. The DPR for Adjusted Earnings per Share (AEPS) for 2022 is 25% with 5 year coverage at 38%. The DPR for Cash Flow per Share (CFPS) for 2022 is 22%, with 5 year coverage at 27%. The DPR for Free Cash Flow (FCF) for 2022 is 15% with 5 year coverage at 22%.
Debt Ratios are fine, but it does have a lot of debt. The Long Term Debt/Market Cap Ratio for 2022 is 0.35 and is good. The Liquidity Ratio for 2022 is low at 1.36, but add in Cash Flow after Dividends and it is good at 1.76. The Debt Ratio is low at 1.32. I prefer this to be 1.50 or higher. The Leverage and Debt/Equity Ratios are too high at 4.14 and 3.14 and I prefer them lower.
The Total Return per year is shown below for years of 5 to 18 to the end of 2022. 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. |
|---|---|---|---|---|---|
| 2017 | 5 | 9.34% | 15.63% | 13.17% | 2.45% |
| 2012 | 10 | 9.60% | 14.14% | 11.65% | 2.50% |
| 2007 | 15 | 9.12% | 13.79% | 11.21% | 2.59% |
| 2004 | 18 | 11.28% | 13.70% | 11.10% | 2.60% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are 15.06, 18.45 and 21.84. The corresponding 10 year ratios are 15.96, 17.94 and 20.35. The corresponding historical ratios are 12.90, 13.95 and 15.43. The current P/E Ratio is 18.75 based on a stock price of $202.53 and EPS estimate for 2023 of $10.80. This ratio is between the median and high ratios of the 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I also have Adjusted Earnings per Share (AEPS) ratios. The 5-year low, median, and high median Price/Earnings per Share Ratios are 12.78, 15.66 and 18.54. The corresponding 10 year ratios are 15.38, 16.68 and 18.59. The current P/AEPS Ratio is 15.71 based on a stock price of $202.53 and AEPS estimate for 2023 of $12.89. The current ratio is between the median and high ratios of the 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get a Graham Price of $161.11. The 10-year low, median, and high median Price/Graham Price Ratios are 1.14, 1.26 and 1.37. The current P/GP Ratio is 1.26 based on a stock price of $202.53. The current ratio is at the median of the 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable and at the median.
I get a 10-year median Price/Book Value per Share Ratio of 2.07. The current ratio is 2.26 based on a Book Value of $15,685M, Book Value per Share of $89.30 and a stock price of $202.53. The current ratio is 9.5% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get a 10-year median Price/Cash Flow per Share Ratio of 12.87. The current P/CF Ratio is 9.38 based on Cash Flow for the last 12 months of $3,665, Cash Flow per Share of $20.91 and a stock price of $202.53. The current ratio is 24.8% 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 2.59%. The current dividend yield is 1.98% based on a stock price of $202.53 and dividends of $4.00. The current dividend yield is 23.7% below the historical median dividend yield. This stock price testing suggests that the stock price is relatively expensive.
I get a 10 year median dividend yield of 2.55%. The current dividend yield is 1.98% based on a stock price of $202.53 and dividends of $4.00. The current dividend yield is 22.6% below the 10 year 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 P/S Ratio is 1.74 based on Revenue estimate for 2023 of $20,452M, Revenue per Share of $116.70. The current ratio is 10% 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 probably expensive. I do like the dividend yield tests the best and they do say the stock price is expensive. The P/S Ratio test just says it is above the median, but still reasonable. The reason I like the P/S Ratio test as it is revenue that ultimately pushes earnings, cash flow and sometimes dividends. Some of the other tests say it is reasonable but above the median.
I can look at the total return over several 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 this chart you can see that both the P/E Ratio and P/S Ratio are currently higher than in the past and the Dividend yield is lower.
In the following chart the capital gains for the 10 years to December 31, 2021 is 11.65% per year. The beginning yield was at 2.47%, and the P/E Ratio and the P/S Ratio were at 14.96 and 1.32. Does this chart change my opinion of the stock price? No. I still like the dividend yield test because we know what the dividends are, for the other items, they are based on analysts’ estimates.
| Years | Cap Gains | Total Ret. | Beg P/E | Beg P/S | Beg Yield |
|---|---|---|---|---|---|
| 5 | 13.17% | 15.63% | 18.26 | 1.71 | 2.44% |
| 10 | 11.65% | 14.14% | 14.96 | 1.32 | 2.47% |
| 15 | 11.21% | 13.79% | 9.88 | 1.25 | 2.73% |
| 18 | 11.10% | 13.70% | 4.52 | 1.12 | |
| current | 18.75 | 1.74 | 1.98% |
When I look at analysts’ recommendations, I find Strong Buy (2), Buy (9), Hold (1) and Underperform (1). The consensus would be a Buy. The 12 month stock price consensus is $221.08. The 12 month stock price consensus is $221.08. This implies a total return of 11.13% with 9.16% from capital gains and 1.98% from dividends.
Analyst on Stock Chase like this company. Stock Chase gives this stock 4 stars out of 5. It is on Money Sense list with a B rating. Adam Othman on Motley Fool thinks this is a good insurance stock to buy for growth. Kay Ng on Motley Fool thinks this is a top insurance stock to buy. The company put out a press release on Newswire about their 2022 results. There is an article on this stock on American Banking and Market News. Simply Wall Street gives this stock 4 stars out of 5. Simply Wall Street gives one warnings of earnings are forecast to decline by an average of 0.3% per year for the next 3 years.
Intact Financial Corp is a property and casualty insurance company that provides written premiums in Canada. The company distributes insurance under the Intact Insurance brand through a network of brokers and a wholly-owned subsidiary, BrokerLink, and directly to consumers through Belairdirect. Its web site is here Intact Financial Corp.
The last stock I wrote about was about was Richelieu Hardware Ltd (TSX-RCH, OTC-RHUHF) ... learn more. The next stock I will write about will be ARC Resources Ltd (TSX-ARX, OTC-AETUF) ... learn more on Monday, February 20, 2023 around 5 pm.
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