IGM FINANCIAL INC. $39 (Toronto symbol IGM; Conservative Growth Portfolio, Finance sector; Shares outstanding: 257.5 million; Market cap: $10.0 billion; Price-to-sales ratio: 3.7; Dividend yield: 5.5%; TSINetwork Rating: Above Average; www.igmfinancial.com) is Canada’s largest independent mutual fund company, with $117.0 billion of assets under management.
Falling stock markets continue to hurt mutual fund sales. As a result, IGM’s earnings fell 5.5%, to $199.7 million, in the three months ended March 31, 2012. A year earlier, it earned $211.2 million. Earnings per share fell 3.7%, to $0.78 from $0.81, on fewer shares outstanding. Revenue declined 5.4%, to $673.1 million from $711.4 million.
To help spur sales and compete with other fund companies, IGM is cutting the management fees on most of the mutual funds it sells through its Investors Group subsidiary. It is also changing the way it pays its salespeople, which will result in savings that will help offset the lower fee income.
The lower fees should not hurt IGM’s ability to keep paying quarterly dividends of $0.5375 a share, for an annualized yield of 5.5%. The stock trades at just 12.3 times IGM’s likely 2012 earnings of $3.18 a share.
IGM Financial is a buy.
