CI Financial Corp.: A Great Stock for Contrarian Investors

In CI Financial Corp. (TSX:CIX), investors get a good dividend and an attractively valued stock.

| More on:
The Motley Fool

CI Financial Corp. (TSX:CIX) is having a rough time these days. Year-to-date, the stock has declined 8.4%, and over the last three years, it has declined almost 30%. Clearly, there are issues related to this company that are sending the shares lower and making analysts more bearish on the stock, namely, competition from the big banks and ETFs, fee pressure, and increased regulatory risks.

But this is exactly what a contrarian’s dreams are made of: a stock that has fallen to levels not seen in years, and a quality company whose industry and/or business is going through hard times, but whose financials are still strong and have hope for a turnaround or improvement. And imagine if we can get that at a bargain price? Well, at this very moment, this may be the situation that investors are faced with in CI Financial, one of Canada’s largest mutual fund companies.

Although 2016 was a year of net redemptions for CI Financial, management has noted that the company has a strong pipeline for 2017 and that its strong advisor relationships and sales initiatives are expected to translate into a stronger 2017. Improving trends were already seen in the fourth quarter of 2016 with AUM increasing 6% year over year, free cash flow per share increasing 2%, and dividends per share increasing 5%.

Going forward, I would expect that synergies from recent acquisitions will increasingly be reflected in CI Financial’s expenses, as both the First Asset and Grand Samuel acquisitions will continue to be integrated. Margins should therefore be expected to improve from current levels.

These acquisitions are part of CI’s strategy to respond to market trends and to grow and expand its presence globally. Scale is critical and further consolidation in the industry is inevitable and will continue. CI Financial is well positioned to be a consolidator.

First Asset strengthens CI Financial’s presence in the fast-growing ETF market, and Grand Samuel gives CI Financial a good presence in the Australian market, where there are good opportunities for growth.

Returning cash to shareholders

CI Financial continues to return cash to shareholders via dividend payments and share buybacks. In the fourth quarter of 2016, the company once again paid out $154 million in free cash flow in the form of dividends and buybacks. For those of us looking for income in our portfolios, this stock has an attractive dividend yield of 5.15%.

In summary, in my view, this stock is one that makes a good addition to investors’ portfolios for its dividend yield and income generation as well as for its upside. The stock is attractively valued.

CI Financial has a good standing in its industry and is taking steps to respond to its changing industry.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Karen Thomas has no position in any stocks mentioned.

More on Dividend Stocks

Businessman holding tablet and showing a growing virtual hologram of statistics, graph and chart with arrow up on dark background. Stock market. Business growth, planning and strategy concept
Dividend Stocks

TFSA Magic: Earn Enormous Passive Income That the CRA Can’t Touch

If you're seeking out passive income, with zero taxes involved, then get on board with a TFSA and this portfolio…

Read more »

Man with no money. Businessman holding empty wallet
Dividend Stocks

2 Stocks Under $50 New Investors Can Confidently Buy

There are some great stocks under $50 that every investor needs to know about. Here’s a look at two great…

Read more »

think thought consider
Dividend Stocks

Down 10.88%: Is ATD Stock a Good Buy After Earnings?

Alimentation Couche-Tard (TSX:ATD) stock might not be the easy buy-case it once was. Here’s a look at what happened.

Read more »

money cash dividends
Dividend Stocks

TFSA Dividend Stocks: Earn $1,200/Year Tax-Free

Canadian stocks like Fortis are a must-have in your portfolio to earn tax-free yields for decades.

Read more »

sale discount best price
Dividend Stocks

1 Dividend Stock Down 11 Percent to Buy Right Now

Do you want a great dividend stock down 11% that can provide years of growth potential? Here's one heavily discounted…

Read more »

Growth from coins
Dividend Stocks

1 Grade A Dividend Stock Down 11% to Buy and Hold Forever 

If you're looking for the right dividend stock at the right price, you're going to want to consider this insurance…

Read more »

Target. Stand out from the crowd
Dividend Stocks

2 Dividend Stocks to Double Up on Right Now

Are you looking for dividend stocks to buy right now? Here are two top picks!

Read more »

edit Taxes CRA
Dividend Stocks

Tax Time: How to Keep More of Your Money

Nearly everyone hates paying taxes, although Canadians can lessen the financial pain with the right tax strategies.

Read more »