Why Intact Financial Corporation Is Down Over 2%

Intact Financial Corporation (TSX:IFC) is down over 2% following its Q4 2017 earnings release. Should you buy on the dip?

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Intact Financial Corporation (TSX:IFC), Canada’s leading provider of property and casualty insurance, announced its fourth-quarter earnings results and a dividend increase after the market closed yesterday, and its stock has responded by falling over 2% in early trading today. Let’s break down the quarterly results, the dividend increase, and the fundamentals of its stock to determine if we should consider using this weakness as a long-term buying opportunity.

A very strong quarterly performance

Here’s a breakdown of 10 of the most notable financial statistics from Intact’s three-month period ended December 31, 2017, compared with the same period in 2016:

Metric Q4 2017 Q4 2016 Change
Direct premiums written $2,294 million $1,961 million 17.0%
Underwriting income $178 million $153 million 16.3%
Net investment income $121 million $104 million 16.3%
Net distribution income $28 million $24 million 16.7%
Net operating income $236 million $212 million 11.3%
Net income $232 million $171 million 35.7%
Net operating income per share $1.63 $1.58 3.2%
Earnings per share $1.60 $1.27 26.0%
Book value per share $48.00 $42.72 12.4%
Operating return on equity for last 12 months 12.9% 12.0% 90 basis points

Dividend hike? Yes, please! 

In the press release, Intact also announced a 9.4% increase to its quarterly dividend to $0.70 per share, and the first payment at this increased rate is payable on March 29 to shareholders of record on March 15.

What should you do with Intact’s stock now?

It was a fantastic quarter overall for Intact, bolstered by its acquisition of OneBeacon Insurance Group in the third quarter of 2017, and it capped off a very strong year for the company, in which its net operating income increased 14.8% to $5.60 per share and its earnings per share increased 44.8% to $5.75 per share. With these results and its dividend increase in mind, I think the market should have responded by sending its stock soaring, and I think the weakness represents a buying opportunity for two fundamental reasons.

First, it’s undervalued. Intact’s stock now trades for just 17 times fiscal 2017’s EPS of $5.75 and only 14.1 times the consensus analyst estimate of $6.94 for fiscal 2018, both of which are very inexpensive given its current earnings-growth rate and its estimated 17.3% long-term earnings-growth rate; these multiples are also inexpensive compared with its five-year average multiple of 18.8.

Second, it has a great dividend. Intact now pays an annual dividend of $2.80 per share, which gives its stock a solid 2.9% yield. It’s also very important to note that the insurance giant has raised its annual dividend payment each of the last 12 years, and the hike it just announced has it on pace for 2018 to mark the 13th consecutive year with an increase, making it one of the best dividend-growth stocks in the industry.

With all of the information provided above in mind, I think all Foolish investors should strongly consider using the post-earnings weakness in Intact Financial as a long-term buying opportunity.

Should you invest $1,000 in Enbridge right now?

Before you buy stock in Enbridge, consider this:

The Motley Fool Stock Advisor Canada analyst team just identified what they believe are the Top Stocks for 2025 and Beyond for investors to buy now… and Enbridge wasn’t one of them. The Top Stocks that made the cut could potentially produce monster returns in the coming years.

Consider MercadoLibre, which we first recommended on January 8, 2014 ... if you invested $1,000 in the “eBay of Latin America” at the time of our recommendation, you’d have $20,697.16!*

Stock Advisor Canada provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month – one from Canada and one from the U.S. The Stock Advisor Canada service has outperformed the return of S&P/TSX Composite Index by 29 percentage points since 2013*.

See the Top Stocks * Returns as of 3/20/25

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 Joseph Solitro has no position in any stocks mentioned. Intact Financial is a recommendation of Stock Advisor Canada.

Confidently Navigate Market Volatility: Claim Your Free Report!

Feeling uneasy about the ups and downs of the stock market lately? You’re not alone. At The Motley Fool Canada, we get it — and we’re here to help. We’ve crafted an essential guide designed to help you through these uncertain times: "5-Step Checklist: How to Prepare Your Portfolio for Volatility."

Don't miss out on this opportunity for peace of mind. Just click below to learn how to receive your complimentary report today!

Get Our Free Report Today

More on Dividend Stocks

TFSA (Tax-Free Savings Account) on wooden blocks and Canadian one hundred dollar bills.
Dividend Stocks

Here’s Exactly How a $20,000 TFSA Could Potentially Grow to $200,000

Index funds like the iShares S&P/TSX Capped Composite Index (TSX:XIC) are tax free in a TFSA.

Read more »

Dividend Stocks

How I’d Invest $6,000 in Canadian Real Estate Stocks to Build Lasting Wealth

Canadian REITs on sale! See how grocery-anchored retail properties offering 9% yields could turn $6,000 into lasting wealth despite US…

Read more »

rain rolls off a protective umbrella in a rainstorm
Dividend Stocks

Economic Headwinds: Should You Still Consider Buying the Dip?

A market dip might seem like a bumpy road, but it can be far smoother in the future with the…

Read more »

e-commerce shopping getting a package
Dividend Stocks

Consumer Spending Plays Amidst the Current Market Dip

Consumption may go down in market dips, but certain consumer stocks are certainly better off than others.

Read more »

Asset Management
Dividend Stocks

12% Dividend Yield! I’m Buying This TSX Stock and Holding for Decades

Stocks with high-dividend yields carry risks. But they could be a good long-term investment. Here is a 12% dividend stock…

Read more »

Canadian flag
Dividend Stocks

How I’d Build a Foundation of Canadian Value Stocks in My Investment Strategy

Canadian investors can explore iShares Canadian Value Index ETF for value stock ideas to build a foundation for their diversified…

Read more »

Canadian dollars are printed
Dividend Stocks

How I’d Transform a $30,000 TFSA Into a Cash-Flow Machine

Here's why TFSA investors should consider owning dividend stocks such as Mullen Group in 2025.

Read more »

A woman shops in a grocery store while pushing a stroller with a child
Dividend Stocks

Dip Buyers Could Win Big in Today’s Market Dip

If you want to buy the dip, think long-term. Which is why this TSX stock is a top option.

Read more »