Is it a good company at a reasonable price? I do not like the amount of debt this company has. Analysts do not seem to be worried. This company cut its dividend, for second time, in 2008 and this is never a good sign. I can see why they cut the dividend the first time as it was because they went from an income trust to a corporation. However, the second cut may be because management is not positive about the near future. The stock price seems to be quite cheap. I would think that buying this stock is risky. If you want a positive, insiders are buying.
I do not own this stock of CI Financial Corp (TSX-CIX, NYSE-CIXX). I started to follow this stock originally because it was a Mutual Fund company. People talked about it being easier to make money from buying a Mutual Fund company than buying Mutual Funds. When they became a Unit Trust in 2006, dividends were significantly increased, but these dividends proved to be unsustainable. They changed back to a corporation in 2009 and dividends were decreased in 2010.
When I was updating my spreadsheet, I noticed the company did not have a good year in 2022 and for the first quarter of 2023. Revenue is down by 14% from 2021 to 2022 to $2,334M. It is up slightly for the 12 months ending in the first quarter of 2023 but only by 0.02%. Last year Revenue estimates for 2022 and 2023 were $3,011M, $3,158M, and this year revenue estimates for 2023 and 2024 are $2,629M and $2,820M.
Last year Adjusted Earnings per Share (AEPS) estimates for 2022 to 2024 were $3.36, $3.63, and $3.78. The AEPS came in $3.10. Now estimate for 2023 to 2025 are $3.23, $3.55, and $3.51. In the first quarter of 2023, AEPS for the last 12 months is down by 3.5%. Last year Net Income estimates for 2022 and 2023 were $553M, and $599M. Net Income came in at 230M and now estimates for 2023 to 2025 are $442M, $542M, and $509M. Net Income is down for the last 12 months ending in the first quarter of 2023 by 36%.
Last year Cash Flow per Share (CFPS) estimates for 2022 and 2023 were $2.23, and $2.12. CFPS came in better at $2.60 and now estimate going forward from 2023 to 2024 are $3.82 and $2.66. CFPS for the last 12 months ending in the first quarter of 2023 is down by 2.4%.
The other thing to note is that insiders are buying. Net Insider buying is at 0.39% of Market Cap and normal Net Insider Buy would be expect to be around 0.01% or 0.02%. All the executives and directors I follow are buying. This includes CEO, CFO and Chairman.
If you had invested in this company in December 2012, for $1,022.13 you would have bought 41 shares at $24.93 per share. In December 2022, after 10 years you would have received $421.17 in dividends. The stock would be worth $553.91. Your total return would have been $975.08.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $24.93 | $1,022.13 | 41 | 10 | $421.17 | $553.91 | $975.08 |
The current dividend yield is moderate with dividend growth flat after being cut. The current dividend yield is moderate (2% to 4% ranges) at 4.85%. The 5, 10 and historical dividend yields are also moderate at 3.69%, 3.81% and 3.65%. The dividends have been flat from 2018 after they were decreased. At that time dividends were decreased by 49% and changed from monthly to quarterly.
This company used to be an income trust. The problem being that the income trust companies can afford to pay higher dividends than corporation. However, this company did decrease the dividends in 2010, but probably not enough as the DPR in 2010 was 66%. Analysts keep thinking that the company will increase dividends in 2022, then in 2023 now in 2024. They will probably do so sometime in the future, it is just hard to know when.
The Dividend Payout Ratios (DPR) are fine. The DPR for 2022 for Earnings per Share (EPS) is 36% with 5 year coverage at 38%. The DPR for 2022 for Adjusted Earnings per Share (AEPS) is 23% with 5 year coverage at 16%. The DPR for 2022 for Cash Flow per Share (CFPS) is 24% with 5 year coverage at 28%. The DPR for 2022 for Free Cash Flow (FCF) is 28% with 5 year coverage at 33%.
| Item | Cur | 5 Years |
|---|---|---|
| EPS | 35.64% | 38.17% |
| AEPS | 23.23% | 16.27% |
| CFPS | 23.53% | 28.27% |
| FCF | 27.76% | 32.69% |
I do not like the balance sheet on this company and if I am misreading it, then I do not want to invest in a company I do not understand. The Long Term Debt/Market Cap Ratio for 2022 is too high at 1.56. It is currently at 1.42 but that is too high also. When this ratio is above 1.00 it means that the company’s long term debt is higher than the breakup value of the company. (In theory anyways.) The Intangible and Goodwill items for this company for 2022 is why too high for 2022 at 3.02. The current ratio is 2.63, but this is also way too high. When it is over 1.00 it means the Intangible items and Goodwill are higher than the breakup value of the company.
The Liquidity Ratio for 2022 is too low at 0.68. Even if you add in Cash Flow after dividends, it becomes 0.66. If you add back in the debt and cash flow you get only to 0.73. However, this is a financial and analysts are generally not worried about Liquidity Ratios for financials. The Debt Ratio for 2022 is 1.20 and is fine for a financial. The Leverage and Debt/Equity Ratio are too high at 5.98 and 4.98.
| Type | Ratio '22 | Ratio Curr |
|---|---|---|
| Lg Term R | 1.56 | 1.42 |
| Intang/GW | 3.02 | 2.63 |
| Liquidity | 0.68 | 0.56 |
| Liq. + CF | 0.66 | 0.73 |
| Liq CF DB | 0.73 | 0.81 |
| Debt Ratio | 1.20 | 1.20 |
| Leverage | 5.98 | 5.96 |
| D/E Ratio | 4.98 | 4.96 |
The Total Return per year is shown below for years of 5 to 28 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 | -12.42% | -10.97% | -14.62% | 3.65% |
| 2012 | 10 | 5.05% | -0.60% | -5.94% | 5.34% |
| 2007 | 15 | -7.11% | 1.05% | -4.76% | 5.81% |
| 2002 | 20 | 13.23% | 9.35% | 0.66% | 8.69% |
| 1997 | 25 | 15.41% | 19.14% | 7.22% | 11.92% |
| 1994 | 28 | 17.16% | 19.04% | 8.30% | 10.74% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are 7.48, 9.87 and 12.64. The corresponding 10 year ratios are 10.28, 13.62 and 16.24. The corresponding historical ratios are 14.80, 16.92 and 19.89. The current P/E Ratio is 6.19 based on a stock price of $14.85 and EPS estimate for 2023 of $2.40. The current ratio is below the low ratio of the 10 year median ratios. This stock price testing suggests that the stock price is relatively cheap.
I also have Adjusted Earnings per Share (AEPS) data. The 5-year low, median, and high median Price/Earnings per Share Ratios are 4.81, 7.48 and 9.68. The corresponding 10 year ratios are 9.48, 11.30 and 13.12. The current P/AEPS Ratio is 4.60 based on a stock price of $14.85 and AEPS estimate for 2023 of $3.23. This stock price testing suggests that the stock price is relatively cheap.
I get a Graham Price of $25.15. The 10-year low, median, and high median Price/Graham Price Ratios are 1.15, 1.38 and 1.62. The current ratio is 0.59 based on a stock price of $14.85. The current ratio is below the low ratio of the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
I get a 10-year median Price/Book Value per Share Ratio of 3.84. The current P/B Ratio is 1.71 based on a stock price of $14.85, Book Value of $1,606M and Book Value per Share of $8.70. The current ratio is 56% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
I get a 10-year median Price/Cash Flow per Share Ratio of 10.23. The current P/CF Ratio is 3.89 based on a stock price of $14.85, Cash Flow per Share estimate for 2023 of $3.82 and a Cash Flow of $705M. The current ratio is 62% 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 3.65%. The current dividend yield is 4.85% based on dividends of $0.72 and a stock price of $14.85. The current dividend 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 3.81%. The current dividend yield is 4.85% based on dividends of $0.72 and a stock price of $14.85. The current dividend yield is 27% 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 3.07. The current P/S Ratio is 1.04 based on Revenue estimate for 2023 of $2,629M, Revenue per Share of $14.25 and a stock price of $14.85. The current ratio is 66% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
Results of stock price testing is that the stock price is probably cheap. The dividend yield tests are saying this and it is confirmed by the P/S Ratio test. It is interesting that the dividend yield tests are saying the stock is cheap because the dividends have been cut and then made flat. All the other testing is showing the same result, that is, the stock price is cheap.
When I look at analysts’ recommendations, I find Strong Buy (1), Buy (3) and Hold (4). The current consensus would be a Buy. The 12 month consensus stock price is $18.44. This implies a total return of 29.02% with 21.18% from capital gains and 4.85% from dividends.
There are lots of comments from analysts on Stock Chase, but mainly they agree it is cheap. It is not currently on the Money Sense lists, but it used to be. Stock Chase gives this stock 4 stars out of 5. Jitendra Parashar on Motley Fool says the stock crashed after releasing first quarter results. Ambrose O'Callaghan on Motley Fool says this dividend stock is worth snatching up. The company put out a Press Release about their results for 2022. The company put out a Press Release for their first quarter of 2023 results.
Simply Wall Street via Yahoo Finance talks about dividends payments by this company. Simply Wall Street has 4 warnings on this stock of debt is not well covered by operating cash flow; unstable dividend track record; large one-off items impacting financial results; and profit margins (6.6%) are lower than last year (14.7%). Simply Wall Street gives this stock 2 and one-half stars out of 5.
CI Financial is a diversified provider of wealth management products and services, primarily in the Canadian market. Its web site is here CI Financial Corp.
The last stock I wrote about was about was Waste Connections Inc (TSX-WCN, NYSE-WCN) ... learn more. The next stock I will write about will be Computer Modelling Group Ltd (TSX-CMG, OTC-CMDXF) ... learn more on Friday, June 23, 2023 around 5 pm. Tomorrow on my other blog I will write about Dividend Information .... learn more on Thursday, June 22, 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.
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