Blue Chip Stocks: Mutual fund sales increase for IGM

The mutual fund provider saw its revenue rise in the latest quarter as sales increased despite new fee disclosure rules.

IGM FINANCIAL INC. (Toronto symbol IGM; www.igmfinancial.com) is Canada’s largest independent mutual fund provider. Power Financial owns 61.5% of IGM.

The company has two main businesses: Mackenzie Financial sells funds through independent brokers; and Investors Group offers mutual funds and other services, such as portfolio management, through 5,380 affiliated advisors.

IGM reported $147.1 billion of assets under management as of March 31, 2017. That’s up 10.3% from $133.4 billion a year earlier. The company’s fee income rises and falls with the value of the mutual funds and other securities it manages.

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Value Stocks: Assets under management down 1% in Q2

As a result, IGM’s revenue in the quarter ended March 31, 2017, rose 9.3%, to $789.7 million from $722.8 million a year earlier. Earnings increased 6.0%, to $177.1 million from $167.0 million; due to fewer shares outstanding, earnings per share gained 7.2%, to $0.74 from $0.69.

In March, IGM’s clients contributed $372.6 million more to its mutual funds than they took out. Specifically, overall sales rose $319.8 million at Investors Group, $51.6 million at Mackenzie and $1.2 million at Investment Planning Counsel.

The company will likely earn $3.31 a share in 2017, and the stock trades at just 12.1 times that forecast. The $2.25 dividend yields 5.6%.

Recommendation in The Successful Investor: BUY

For our views on an often underrated area of value investing, read How to realize big benefits from a holding company discount.

For our recent report on a Canadian value stock we rate as a buy, read Asset sale cuts debt for Mitel Networks.

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Blue Chip Stocks

Blue chip stocks are big, well-established, dividend-paying corporations with strong business prospects. These are companies that also have sound management that should be able to make the right moves to keep competing successfully in a changing marketplace.

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Dividend stocks make cash payouts that serve as a way for companies to share the wealth they’ve accumulated. These payouts are drawn from earnings and cash flow and paid to the shareholders of the company. Typically, these dividends are paid quarterly, although they may be paid annually or even monthly as well.

Value Stocks

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One of the sweetest and most profitable pleasures of successful investing is to buy high-quality “value stocks” (or stocks that are reasonably priced, if not cheap, in relation to its sales, earnings or assets), then hold on to them as mainstream investors recognize the value and push up the share price.

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Growth stocks are companies that are likely to have sales and earnings growth well above market average. Frequently they pay few, if any, dividends. Instead they typically reinvest any extra cash flow to promote further growth. Chosen wisely—according to Pat McKeough’s advice—high-quality growth-oriented stocks can be worthwhile additions to most well-diversified portfolios.

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