While assets under management have declined with the recent market downturn, a recent acquisition will help lift IGM Financial’s business in China and add to earnings immediately.
We expect stock market volatility and higher interest rates to create more demand for the firm’s professional advisors.
The stock trades at 12.1 times the company’s 2023 earnings forecast.
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IGM FINANCIAL INC. (Toronto symbol IGM; www.igmfinancial.com) is Canada’s largest independent mutual-fund provider. It also offers ETFs and wealth management services.
IGM has two main businesses: Mackenzie Financial sells funds and ETFs through independent brokers; and IG Wealth Management (formerly Investors Group) offers mutual funds and other services, such as portfolio management, through its more than 3,000 affiliated advisors.
IGM’s fee income rises and falls with the value of the mutual funds and other securities it manages.
The company, through its Mackenzie Financial subsidiary, has completed the purchase of an additional 13.9% stake in China Asset Management Co., Ltd. from parent company Power Corp. That increased its stake in this businesses to 28.7%.
To help fund the $1.15 billion purchase price, IGM sold $552.7 million of its shares in Great-West Lifeco to Power Corp. That cut its stake in Great-West from 4% to 2.4%.
The company funded the remaining $597.3 million of the purchase price with its existing cash balances, which totalled $1.05 billion as of September 30, 2022.
The deal will make it easier for Mackenzie Financial to market its funds and other products to China AMC’s clients. The transaction should also add to IGM’s earnings in the first year.
Value Stocks: Market downturn creates value and a high yield for IGM Financial
Due to the stock market downturn, IGM’s assets under management (and advisement) fell 10.0%, to $249.4 billion for December 31, 2022, from $277.1 billion a year earlier. The company also reported a net outflow of new money (net of redemptions) of $23.6 million in December 2022. In December 2021, overall net inflows totalled $474.1 million.
Even so, the recent stock market volatility and higher interest rates will probably prompt more individuals to turn to IGM’s professional advisors. The stock also trades at a moderate 12.1 times the $3.57 a share that IGM will likely earn in 2023.
IGM 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. That makes for a high 5.2% yield.
IGM’s TSI Dividend Sustainability Rating is Above Average.
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Alliance Bernstein (AB) is another company that offers funds, like IGM, and offers an 8% yield.