IGM Financial Inc. fourth-quarter profit jumped 76 per cent over the previous year and beat analyst expectations as revenue climbed with higher investment income and rising management fees.
The Winnipeg-based fund giant, which owns Investors Group and Mackenzie Financial, said Friday that profit rose to $200.2-million, or 76 cents a share, for the quarter ended Dec. 31 from $113.7-million, or 43 cents a share, a year earlier. Analysts polled had expected 71 cents a share, according to Thomson Reuters I/B/E/S.
Revenue rose to $692.2-million for the latest quarter from $546.7-million a year earlier.
"This was a strong quarter for IGM, and investors should be pleased," said Barclays Capital analyst John Aiken. "We caution, however, that some of the revenue growth may not necessarily be recurring, particularly the roughly 40 per cent sequential increase in net investment income."
But the operating leverage generated from strong cost controls could be recurring and would represent a lift to earnings in the future, Mr. Aiken wrote in a note to clients.
Canaccord Genuity analyst Scott Chan said he was surprised that IGM did not raise its dividend, and hasn't done so since the third quarter of 2008. Most of its peers have increased their quarterly payouts since the start of 2009, he said. "Fiera Sceptre raised its dividend by 33 per cent this week."
But the reason could be that "IGM's stock really hasn't moved that much,' said Mr. Chan, who has a "buy" rating on IGM with a one-year target of $53 a share. "It has been a relative underperformer so the dividend yield is still at 4.7 per cent, whereas the other asset managers' stock have increased a lot more. They had to increase their dividend to maintain the yield for investors.
"On the flip side, IGM is buying back more of its own shares because the stock is cheap," Mr. Chan noted. "They bought back a lot last quarter, which is another way to add value to shareholders."
IGM Financial is an indirect, publicly traded subsidiary of Montreal-based Power Corp. of Canada, which is the parent of Great-West Lifeco Inc. and Power Financial Corp. Total assets under management rose 7.4 per cent to $129.5-billion at Dec. 31, 2010, from a year earlier as stock markets continued to rally.
The Investors Group unit reported net redemptions of $38-million for the latest quarter compared with net sales of $154-million a year earlier. At Mackenzie Financial, net redemptions for the quarter fell to $267-million compared with $509-million in the previous year.
While IGM has normally released monthly sales data, it stopped doing so beginning January. It said it would only be giving out these figures when reporting its quarterly results.