One of the easiest ways to grow wealth is a simple buy-and-hold strategy that “sets it and forgets it”. In this strategy, you buy a selection of best-in-class TSX stocks, hold them long term (ideally forever), and watch your nest egg steadily grow. Investment returns tend to compound with dividend growth and reinvestment, and could snowball into a sizeable retirement fund – financially setting you up for life.
An investment in Intact Financial (TSX:IFC) stock today could generate steady capital gains, earn growing quarterly dividend paycheques for a lifetime, and help set you up for a pretty long, worry-free retirement.
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Intact Financial stock: A reliable growth engine
Intact Financial, a Canadian insurance giant, has grown into a global financial industry force organically and through strategic acquisitions over the past two decades. It has excelled at generating strong shareholder returns, consistently outperforming market peers. Consequently, its reputation remains intact.
The $43 billion property and casualty insurer was a significantly smaller player in 2009, boasting a market capitalization of just $4.3 billion. Since then, IFC stock has grown tenfold through organic business volume expansion, sustained profitability, and accretive acquisitions. Its proven business strategy positions it well for continued stock price appreciation beyond the next decade.
Intact Financial’s track record speaks for itself. Since going public 20 years ago, IFC stock has generated a staggering 1,288% in total returns for shareholders. A $10,000 investment back in 2004 would be worth over 102,000 today. The stock’s potential for generating wealth is far from exhausted.
How will Intact Financial continue to reward investors?
The insurance giant’s focus on strategic acquisitions remains a key growth driver. It opportunistically acquired a United Kingdom-based competitor recently to grow volumes. The company has closed nine accretive acquisitions since 2009.
Further, organic growth in underwritten premiums should remain positive, fueled by healthy economies in Intact Financial’s markets, positive interest rate regimes, strong brand recognition, population growth rates in target markets due to immigration, and Intact Financial’s continuous innovation expanding its market share.
Innovation: The key to unlocking IFC stock’s future growth
Intact Financial has already deployed more than 93 artificial intelligence (AI) models to maintain agility, gain a data-driven competitive edge, control costs, and attract more business from customers.
Investments in operational efficiency and data-driven performance should propel Intact Financial towards achieving its long-term goal of 10% annual growth in net operating income per share (NOIPS) and exceeding industry return on equity (ROE) by 500 basis points.
The company has historically comfortably beaten its long-term targets. Recent management reports show IFC stock delivered a 12% compound annual growth rate in NOIPS and exceeded average industry ROE by 6.8% over the past decade.
Intact Financial’s strong NOIPS growth over the past decade translated into a 15.7% average annual total return on IFC stock. Continued income growth and above-average ROE can attract further investment, fuelling sustained share price appreciation beyond the next decade.
Sustainable dividends enhance shareholder value
Intact Financial offers a quarterly dividend with a 2% annual yield. The dividend yield seems low for new dividend investors today only because the stock price has persistently rallied. Management has raised dividends for 19 consecutive years while IFC stock’s dividend growth averaged 9.6% per annum over the past decade. The dividend is healthy given an earnings payout ratio of 52%.
Growing dividends can significantly compound returns on IFC stock, setting you up for a lifetime of increasing passive income. For example, investors who bought the stock at prices under $29 a share in December 2004 earned $0.163 per share in quarterly dividends ($0.65 annualized). The quarterly payout has grown to $1.21 per share ($4.84 annualized) today. Early investors in 2004 could be earning a 17% dividend yield (on cost) this year. Their dividend “earnings” have substantially grown. They are well set for a lifetime of passive income.
If you want in on this proven TSX stock that has set others up for life, you can purchase some shares today. The stock appears fairly valued with a forward price-to-earnings (PE) multiple of 15.4 and a price-earnings-to-growth (PEG) ratio of 1.2, which implies IFC stock is appropriately priced considering its strong potential for double-digit earnings growth.
