Mutual fund giant IGM Financial Inc. on Thursday reported a jump in second-quarter profit on higher fee revenue and also boosted its quarterly dividend.
Profit rose to $216.9-million, or 84 cents a share, for the three months ended June 30, from $178.3-million, or 68 cents a share, in the previous year.
The company's board of directors increased IGM's quarterly dividend by 2.50 cents a share to 53.75 cents on its common shares. It is the first dividend increase since mid 2008.
"We would be more than delighted to increase the dividend [annually]if we can have a good healthy increase in our earnings," Murray Taylor, co-chief executive officer at IGM, told analysts during a conference call.
Winnipeg-based IGM owns Investors Group, which sells funds and other financial products through its own network of 4,592 advisers, and Mackenzie Financial Corp., which deals with independent advisers for its fund offerings.
Total revenue for IGM in the second quarter totalled $710.2-million, compared with $636.7-million in the year-ago period. Mutual-fund assets, which are affected by market appreciation as well as sales, rose 12.5 per cent to $130.2-billion from $115.7-billion a year ago.
Investors Group, however, continued to suffer from mutual fund net redemptions, rising in the latest quarter to $145-million from $103-million a year earlier. Mackenzie Financial saw fund net redemptions fall in the quarter to $173-million from $516-million a year ago.
Mackenzie Financial has had strong performance in its funds with 73 per cent of assets ranked in the first or second quartile of their respective categories, said Charles Sims, a co-chief executive at IGM who heads the Mackenzie division.
Asked by one analyst about Mackenzie's reaction to U.S. low-fee fund giant Vanguard Group Inc. coming to Canada later this year, Mr. Sims said he is not worried because he feels that the majority of Canadian investors are willing to pay higher fees to get advice. The cost of advice is embedded in the overall mutual fund fees charged to investors.
While Vanguard has not publicly stated what products it will offer, sources say it will focus on exchange-trade fund (ETFs). In a report issued in June, Moody's Investor Service said that Vanguard's low-cost model is "certain to exert price pressure on Canada's dominant mutual fund players."
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