As a seller of mutual funds and wealth management services, this firm’s fee income rises and falls with the value of the securities it manages.
Due to the drop in stock values, the shares are down 19% since the start of 2022. However, the current uncertainty and rising interest rates should prompt more individuals to turn to the company’s advisors.
Meanwhile the stock trades at just 10.6 times the company’s 2022 earnings forecast.
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IGM FINANCIAL INC. (Toronto symbol IGM; www.igmfinancial.com) is Canada’s largest independent mutual-fund provider. Power Corp. owns 62.2% of IGM.
The company 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 3,200 affiliated advisors.
The company last raised its quarterly dividend by 4.7% with the January 2015 payment. The current annual rate of $2.25 a share yields a high 6.1%.
IGM’s fee income rises and falls with the value of the mutual funds and other securities it manages.
Due to the stock market downturn in the first nine months of 2022, IGM’s assets under management (and advisement) fell 10.2%, to $238.1 billion as of September 30, 2022, from $265.2 billion a year earlier.
Value Stocks: Earnings fall but new fund and wealth management clients arrive
The stock market volatility in the first half of 2022 also prompted IGM to write down the value of its 24% stake in robo-advisor Wealthsimple to $492 million as of June 30, 2022, from its $925 million on March 31, 2022. Generally, robo-advisors provide portfolios composed of ETFs tailored to different investor goals. That charge is partly why earnings in the quarter fell 12.1%, to $0.87 a share from $0.99.
Despite the current volatility, the company continues to attract new clients. In the first half of 2022, net inflows of new money totaled $1.9 billion, up from $1.7 billion in the first half of 2021.
IGM will also benefit from its upcoming acquisition of Power Corp.’s 13.9% interest in China Asset Management Co., Ltd., one of that country’s largest mutual fund sellers.
The company will pay $1.15 billion in cash for that stake, which will double its holding to 27.8%. The purchase will help IGM tap growing demand for wealth management services in China. The company expects to complete the transaction by the end of 2022.
However, the current uncertainty and rising interest rates should prompt more individuals to turn to IGM’s advisors. The stock also trades at a moderate 10.6 times the $3.52 a share the company should earn this year.
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I am at loss as to why you would recommend a buy for IGM. For years the div. growth is and has been nonexistent. The Bets is around 1.57 which is consistent with this high-risk industry. The div is high but I see this as a reflection on Management trying to attract div investors, but this indicates that they are trying to reinfest elsewhere and the div is going to continue to erode due to inflation. As a div investor I
would give this a poor rating.