Canadians continue to buy more mutual funds than investors in any other nation, and this company is a major beneficiary of those sales.
Its assets under management continue to rise as its customers buy more funds than they redeem. The company is also taking steps to improve its efficiency by combining some operations of its two major segments. Its dividend yields a high 5.0%.
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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 POW) which changed its name to Investors Group. The company merged with Mackenzie in 2001 to form IGM Financial. Power owns 61% of IGM.
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. It yields a high 5.0%.
The company had $156.5 billion in assets under management on December 31, 2017. That’s up 9.7% from $142.7 billion a year earlier. The company’s fee income rises and falls with the value of the mutual funds and securities it manages.
Value Stocks: Overall fund sales continue to rise in December
In December, the company’s clients contributed $174.1 million more to its mutual funds and ETFs than they took out. Specifically, overall sales were $105.0 million at Investors Group and $76.0 million at Mackenzie. Those gains were more than enough to offset a $7.1 million decline at Investment Planning Counsel.
Despite higher assets under management, IGM’s revenue in the third quarter ended September 30, 2017, fell 1.0%, to $773.3 million from $776.5 million a year earlier. That decline is partly due to lower income from its investment portfolio. Investment losses also contributed to a 12.2% decline in its earnings, to $0.72 (or a total of $173.4 million) from $0.82 (or $197.6 million).
IGM Financial recently announced several initiatives to improve its efficiency, including combining some of the Mackenzie and Investors Group’s operations. The plan will reduce the company’s fourth quarter earnings by $0.49 per share.
The stock trades at just 12.3 times the $3.55 a share that IGM will probably earn in 2018.
Recommendation in The Successful Investor: IGM Financial is a buy.
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