Buy bargain stock CI Financial on the cheap

When Scotiabank unveiled plans to sell some of its shares of CI Financial, the latter’s share price fell. This gives you the opportunity to buy CI as a bargain stock, on the cheap. The company is performing well, is earning record results and continues to reward its shareholders.

We added CI Financial to our list of Key stocks in our May 9 issue. It offers a wide range of investment products and services, “including an industry-leading selection of investment funds.”

The big banks are seeking to build their wealth-management businesses. That’s why we thought that Bank of Nova Scotia might try to raise its stake in CI from 36.8 per cent today to 100 per cent.

Bank of Nova Scotia surprised us by saying that it plans to “monetize” part of its stake in CI. That is, the bank hopes to sell some of its CI shares to other investors. It could also sell these shares to the public. This creates what’s known as an ‘overhang’. Since the market knows that the supply of shares will rise, it marked down CI’s share price.

This gives you an opportunity to buy CI as a great bargain stock. As far as bargain stocks go, this one’s a pretty good bet. Given the company’s solid first quarter results and its favorable outlook, you should buy.

CI keeps on doing better and better

In the first three months of 2014, CI earned $121.7 million, or 43 cents a share. This was up by nearly 23 per cent from earnings of $98.5 million, or 35 cents a share, a year earlier. On the strength of these results, the company raised its monthly dividend to 10 cents a share—or to a yearly $1.20 a share. The dividend now yields an attractive 3.57 per cent.

CI president and chief executive officer Stephen MacPhail said, “I am proud to report CI’s best quarter ever…gross and net sales increased significantly, our assets under management reached new highs…and we were able to reward shareholders with our fourth dividend increase in the last 15 months. At the same time, we have been able to find efficiencies in the business.”

In the first quarter, CI’s net sales of mutual funds (sales less redemptions) reached $1.719 billion. This was up from net sales of $1.147 billion, a year earlier. This was also the company’s highest level of net sales in over a decade. Gross sales of mutual funds in the first quarter hit a record high of $4.406 billion. Chairman William Holland says this reflected “strong results across all distribution channels.”

On March 31, assets under management of $96.5 billion set a new record. This was up by nearly a fifth from $80.5 billion a year earlier. By April 30, assets under management had risen to $97.3 billion and total assets to $125.8 billion. Growing assets bode well for future earnings growth. Even better, CI’s return on equity is an outstanding 25.1 per cent. And it also controls its costs.

Buy C.I. FINANCIAL $33.57 (Quality rating: Very Conservative; Sector: Finance; TSX—CIF; T: 416-364-1145; on the cheap for long-term share price gains as well as high and rising dividends.


The Investment Reporter, MPL Communications Inc.
133 Richmond St.W., Toronto, ON, M5H 3M8. 1-800-804-8846

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