Valued at a market cap of $1 billion, Fiera Capital (TSX:FSZ) is an investment manager that provides services to institutional investors, mutual funds, and private clients. Founded in 2002, it manages client-focused equity, fixed-income, and balanced portfolios. Fiera Capital invests in the public equity and fixed-income markets globally, focusing on Canada and growth and value stocks.
Since its initial public offering in September 2010, Fiera Capital has returned just 36% to shareholders. However, if we account for dividend reinvestments, cumulative returns are much higher at 255%, compared to the TSX index returns of 235%.
Like other asset managers, Fiera performs well during periods of economic expansion, resulting in higher inflows and earnings. While the broader stock market indices are trading near all-time highs, FSZ stock is down almost 40% from record levels, allowing you to buy the dip.
Moreover, an asset-light model allows Fiera Capital to pay shareholders an annual dividend of $0.86 per share, translating to a forward yield of 8.6%. So, let’s see if you should own the TSX dividend stock for its tasty yield right now.
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Is Fiera Capital a good stock to own?
Fiera Capital has increased its revenue from $222.4 million in 2014 to $686.6 million in 2023. In the last 12 months, sales have risen by 8.4% year over year to $715.6 million. The company’s steady growth can be attributed to an increase in assets under management and strong equity returns over the past decade.
Fiera Capital ended the third quarter (Q3) of 2024 with $165.5 billion in assets under management, an increase of 4% year over year. The asset manager emphasized that it is well-positioned to capitalize on the dovish shift in monetary policy, which should create favourable conditions in the equity and fixed-income markets.
In the September quarter, Fiera Capital demonstrated robust performance across multiple strategies. Its fixed-income fund strategies outperformed benchmarks by 70-80 basis points, while the global multi-sector income strategy outperformed by 140 basis points.
Meanwhile, the private markets platform continues to show strong momentum, with $400 million in new mandates and $500 million deployed in Q3.
With a robust pipeline of $1.4 billion in commitments available for deployment, this high-margin business segment is poised for continued growth. Fiera’s private markets segment now contributes 34% of total revenues despite representing only 12% of assets under management, providing revenue diversification and stability.
In Q3, Fiera increased adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) by 18% year over year to $51.7 million. Its EBITDA margin expanded to 30.1% from 27.7% in the year-ago period, while net earnings growth was higher at 32%.
Is the TSX dividend stock undervalued?
Analysts tracking Fiera expect sales to rise to $775 million in 2026. Comparatively, adjusted earnings are forecast to expand from $1 per share in 2023 to $1.2 per share in 2026. So, the TSX stock is priced at 7.8 times forward earnings, which is cheap.
Bay Street projects the company to report a free cash flow of over $100 million annually between 2024 and 2026. With an annual dividend expense of $90 million, Fiera has a payout ratio of less than 90%, making it a top investment choice right now.
The company’s dividend expense is easily covered by its free cash flow, which suggests that investors should brace for additional dividend hikes. Over the last 14 years, the TSX stock has more than tripled its dividend payout, enhancing the yield at cost significantly. In addition to its dividend yield, FSZ stock trades at an 8% discount to consensus price target estimates.
