Is it a good company at a reasonable price? The stock price is probably reasonable. This stock is still making money. However, I would not buy it because it is no longer a dividend growth company, but I would suspect that at some time in the future it will be dividend growth again. If I held it, I would probably not sell it. The total return has been low for several years, but investors have been getting a good return in dividends.
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 owned this stock from 2006 to 2011. I sold because I decided to rationalizing my portfolio. Selling ones that did not make it into my core and buying ones that did of the same type.
When I was updating my spreadsheet, I noticed growth for this company has been low over the past 5 and 10 years.
| Year | Item | Tot. Growth | Per Year |
|---|---|---|---|
| 5 | Revenue Growth | 6.44% | 1.26% |
| 5 | AEPS Growth | 20.20% | 3.75% |
| 5 | Net Income Growth | 44.08% | 7.58% |
| 5 | Cash Flow Growth | 12.18% | 2.33% |
| 5 | Dividend Growth | 0.00% | 0.00% |
| 5 | Stock Price Growth | -16.80% | -3.06% |
| 10 | Revenue Growth | 30.25% | 2.68% |
| 10 | AEPS Growth | 21.40% | 1.96% |
| 10 | Net Income Growth | 13.79% | 1.30% |
| 10 | Cash Flow Growth | 3.96% | 0.39% |
| 10 | Dividend Growth | 4.65% | 0.46% |
| 10 | Stock Price Growth | -10.05% | -0.95% |
Analyst had expected the EPS to go up by 9% to $4.45. Instead, the EPS went down 11% to $3.63.
If you had invested in this company in December 2012, for $1,040.00 you would have bought 25 shares at $41.60 per share. In December 2022, after 10 years you would have received $557.50 in dividends. The stock would be worth $945.00. Your total return would have been $1,502.50.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $41.60 | $1,040.00 | 25 | 10 | $557.50 | $945.00 | $1,502.50 |
The dividend yields are good with dividend growth non-existent. The current dividend yield is good (5% to 6% yields) at 5.30%. The 5 and 10 year median dividend yields are also good at 6.00% and 5.77%. The historical median dividend is moderate (2% to 4% ranges) at 3.97%. The last dividend increase was in 2015. Analysts do not expect any increases anytime soon.
Some Dividend Payout Ratios (DPR) need improving. The DPR for 2022 for EPS is 62% with 5 year coverage at 65%. The DPR for Adjusted Earnings per Share (AEPS) for 2022 is 62% with 5 year coverage at 65%. The DPR for Cash Flow per Share for 2022 is 72% with 5 year coverage at 69%. I prefer this to be at 40% or less. The DPR for Free Cash Flow for 2022 is 90% with 5 year coverage at 78%. I prefer this to be at 60% or less, however, there is no agreement on what the FCF should be.
Debt Ratios are fine. The Long Term Debt/Market Cap is 0.23 and this is low and good. The Liquidity Ratio for 2022, I calculated to be 2.29, but this is not important for Financials. The Debt Ratio is good at 1.50. The Leverage and Debt/Equity Ratios are 3.01 and 2.01. I prefer these to be under 3.00 and 2.00, respectively.
The Total Return per year is shown below for years of 5 to 32 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. | check |
|---|---|---|---|---|---|---|
| 2017 | 5 | 0.00% | 2.35% | -3.06% | 4.51% | 1.45% |
| 2012 | 10 | 0.46% | 4.61% | -0.95% | 5.57% | 4.61% |
| 2007 | 15 | 1.59% | 3.02% | -1.85% | 4.87% | 3.02% |
| 2002 | 20 | 4.93% | 7.97% | 1.89% | 6.09% | 7.97% |
| 1997 | 25 | 8.39% | 7.19% | 2.08% | 5.11% | 7.19% |
| 1992 | 30 | 10.58% | 12.85% | 6.06% | 6.79% | 12.85% |
| 1990 | 32 | 10.22% | 16.26% | 8.03% | 8.23% | 16.26% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are 9.34, 11.28 and 12.80. The corresponding 10 year ratios are 9.96, 11.63 and 13.73. The corresponding historical ratios are 13.30, 15.06 and 17.58. The current P/E Ratio is 11.15 based on a stock price of $42.49 and EPS estimate for 2023 of $3.81. 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 also have Adjusted Earnings per Share (AEPS) data. The 5-year low, median, and high median Price/Adjusted Earnings per Share Ratios are 9.21, 11.13 and 12.61. The corresponding 10 year ratios are 10.07, 11.61 and 13.49. The current ratio is 11.30 based on a stock price of $42.49 and AEPS estimate for 2023 of $3.76. 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 Graham Price of $40.48. The 10-year low, median, and high median Price/Graham Price Ratios are 0.87, 1.03 and 1.24. The current P/GP Ratio is 1.05 based on a stock price of $42.49. 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 10-year median Price/Book Value per Share Ratio of 2.11. The current P/B Ratio is 2.19 based on a stock price of $42.49. The current ratio is 4% 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 12.53. The current P/CF Ratio is 13.69 based on Cash Flow for the last 12 months of $737.7M, Cash Flow per Share of $3.10 and a stock price of $42.49. The current ratio is 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 3.97%. The current dividend yield is 5.30 based on a stock price of $42.49 and dividends of $2.25. The current yield is 33% 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 5.77%. The current dividend yield is 5.30 based on a stock price of $42.49 and dividends of $2.25. The current yield is 8% 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 2.86. The current P/S Ratio is 2.87 based on Revenue estimate for 2023 of $3,522M, Revenue per Share of $14.82 and a stock price of $42.49. The current ratio is 0.2% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and at the median.
Results of stock price testing is that the stock price is probably reasonable. The P/S Ratio says this as does most of the testing. The dividend yield tests say either cheap or above the median. The problem with the dividend yield testing is the dividends have been flat for some 8 years. This is generally not a healthy sign.
When I look at analysts’ recommendations, I find Strong Buy (2), Buy (1), Hold (5) and Underperform (1). The consensus is a Buy. The 12 months stock price consensus is $45.22. This implies a total return of 11.72% with 6.43% from capital gains and 5.30% from dividends.
Analysts on Stock Chase have various views on this company. One said to expect most of your return to be in dividends. Stock Chase gives this stock 3 starts out of 4. It is on the Money Sense list at number 44. Joey Frenette on Motley Fool says this is a stock to avoid. Adam Othman on Motley Fool likes the dividend on this stock. The company put out a press release on Newswire about its fourth quarter.
Simply Wall Street on Yahoo Finance says that the dividend is sustainable. Simply Wall Street gives this stock 4 stars out of 5. It gives one warning of dividend of 5.4% is not well covered.
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 on Wednesday, March 8, 2023 around 5 pm. Tomorrow on my other blog I will write about Dividend Stocks March 2023.... learn more on Tuesday, March 7, 2023 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.
See my website for stocks followed and investment notes. I have three blogs. The first talks only about specific stocks and is called Investment Talk. The second one contains information on mostly investing and is called Investing Economics Mostly. My last blog is for my book reviews and it is called Non-Fiction Mostly. Follow me on Twitter or StockTwits. I am on Instagram. Or you can just Google #walktoronto spbrunner8166 to see my pictures.
No comments:
Post a Comment