Canadian fund giant enjoys rising sales, high yield

As Canadians continue to buy mutual funds in large numbers, this stock is one of the prime beneficiaries.

The company’s assets under management reached a new high in the most recent quarter as customers keep on buying more funds than they redeem. Revenue rose and earnings per share jumped. Meanwhile, the stock trades at a low 11 times forecast earnings, and yields a high 5.9%.


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IGM FINANCIAL INC. (Toronto symbol IGM; www.igmfinancial.com) is Canada’s largest independent mutual-fund provider. Founded in 1926 as Investors Syndicate, the company was acquired in 1986 by the financial arm of Power Corporation of Canada (Toronto symbol PWF) which changed its name to Investors Group. The company merged with Mackenzie in 2001 to form IGM Financial. Power owns 61% of IGM.

Its main businesses are Investors Group, Mackenzie Financial and Investment Planning Counsel. In 2017 the company undertook several initiatives to improve its efficiency, including combining some of the Mackenzie and Investors Group’s operations.

The company had $159.1 billion in assets under management as of June 30, 2018, the highest in IGM’s history. That’s up 7.1% from a year earlier. The company’s fee income rises and falls with the value of the mutual funds and other securities it manages.

IGM’s clients contributed $141.8 million more to its mutual funds and ETFs in June 2018 than they took out over the month. That’s a gain of 12.2% over the company’s net sales of $126.4 million in May 2018.

Blue Chip Stocks: Earnings per share up more than 10% in the latest quarter

Specifically, Investors Group had overall fund sales of $2.1 billion for the quarter, while Mackenzie’s mutual funds sales were $2.7 billion. The company also reported strong growth in exchange-traded funds, with assets under management for ETFs reaching a new high of $2.6 billion.

In the second quarter ended June 30, 2018, IGM’s revenue rose 2.2%, to $815.9 million from $798.2 million a year earlier.

Earnings increased 1.4%, to $203.7 million from $200.8 million; due to more shares outstanding, earnings per share gained 10.3%, to $0.85 from $0.77.

The company last raised its quarterly dividend by 4.7% with the January 2015 payment. Investors receive $0.5625 per share for an annual rate of $2.25. It yields a high 5.9%.

The stock trades at just 11.0 times the $3.36 a share that IGM will probably earn in 2018.

Recommendation in The Successful Investor: IGM Financial is a buy.

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