Intact Financial (IFC), a hidden gem for growth

IFC - Intact FinancialIntact Financial is the leading provider of casualty and property insurance in Canada. You may have seen their ads on TV where they guarantee to start your claim within 30 minutes of your call. It’s a bold claim but it definitely provides a sense of security as a homeowner.

Intact Financial dates back 200 years with Halifax Fire Insurance Association being the starting point in the company’s transformation through acquisitions. However, the more recent history has Intact making a number of acquisitions since the 90’s as ING Group. The start of Intact was really started with the take over of Allianz Canada by ING Group in 2004 when ING formeda  new company on the TSE where it held 70% of the stocks. That company then became independent of the ING Group in 2009 and got its most recent name of Intact Financial.

Intact - Acquisitions

Intact Financial Summary

Intact TSE:IFC is part of the financial sector with an industry focus of property & casualty insurance. While they have a long history, March 17, 2006 marks the day Intact got its stock added to the S&P/TSX composite index.

Below is the Intact by the numbers. The yield is lower than the banks but that’s the price to pay for growth.

  • Stock: TSE:IFC
  • Market Cap: $11.81 B
  • P/E: 17.25
  • Dividend Yield: 2.58%
  • Dividend Payout Ratio: 44.53%

Below are the distributors in place for the company to sell insurance as well as independent brokers.

Intact Distributors

Core Metric #1: DIVIDEND GROWTH

Intact is part of the 10-10 dividend growth club. That means it has increased its dividend for at least 10 consecutive years with a CAGR (Compound Annual Growth Rate) of 10% on average. That’s a regular 10% pay raise.

Below are the numbers for the 3, 5 and 10-year CAGR. As you can see, it’s pretty consistent which is something we want in companies with invest in for the long term.

  • 3 year average of 9.83%
  • 5 year average of 9.28%
  • 10 year average of 12.55%

Here is a snapshot of the dividend growth from the company’s report.

IFC - Dividend Growth

Core Metric #2: DIVIDEND PAYOUT RATIO

Aside from the tough financial crisis back in 2008/2009, IFC has a really healthy dividend payout ratio. I would prefer to see growth consistency in the earnings otherwise the numbers will create warning bells every now and again and too many warning bells are not good for the long-term investors as you don’t want to worry about an investment.

  • 3 year average of 42.68%
  • 5 year average of 39.38%
  • 10 year average of 49.41%

Intact - Dividend Payout

Core Metric #3: CONSECUTIVE DIVIDEND INCREASES

IFC is a new company in the eyes of the stock market but it started paying dividends in 2005 and has increased its dividends every year since. That’s 11 years total and that’s big for a Canadian company when you consider all the banks have held their dividends flat for one year and the big life insurance companies have held theirs flat for long.

Investment Philosophy #1: BUSINESS QUALITY

The insurance business is a necessity for all homeowners with a mortgage as you generally require a proof of insurance for your mortgage holders to know their assets won’t just go up in flames.

One big intangible not always mentioned by companies is the succession plan for executives. There is nothing more troubling than not having captain leading the charge. It can lead to a dysfunctional turnaround or a lack of company goals. Intact has a clear succession plan with prospects identified for each key executive roles and that provides Intact with a strong management principal.

IFC - Executive Bench

Investing Opportunity Score: 62%

Based on my Opportunity Score formula, Intact Insurance has a score of 62% (the higher the better) for being an investing opportunity. Above 60% is a good range to pay attention to timing. Anything around 80% will have a short window of opportunity unless the stock got beaten down like SNC TSE:SNC.

I consider IFC an investment opportunity but it depends on what you need in your portfolio and which account you would invest in and where you are in your investment journey. As you can see, there has been a lot of growth and they are a leader in their business segment. How much more can grow and how fast is not obvious. They have the lowest dividend yield of all its competitors so it really depends on what you are looking for to build your dividend income portfolio.

IFC - Stock Growth

Do you want to find out where the competitors stack up against Intact? Just subscribe to the Dividend Performance List over at Dividend Snapshot.

DISCLOSURE: Please note that I may have a position in one or many of the holdings listed. For a complete list of my holdings, please see my Dividend Portfolio.

DISCLAIMER: Please note that this blog post represents my opinion and not an advice/recommendation. I am not a financial adviser, I am not qualified to give financial advice. Before you buy any stocks/funds consult with a qualified financial planner. Make your investment decisions at your own risk – see my full disclaimer for more details.
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