Intact Financial Stock – Which is better – Common or Preferred?

In this video we examine Intact Financial preferred and common stock to see which one is best. We make the decision based on today’s latest data.

In this video we examine Intact Financial preferred and common stock to see which one is best. We make the decision based on today’s latest data. 

The conclusion will change over time based on changes to preferred and common stock but the process of arriving at the decision is the same.  

For this video I will use the premium site. Similar information can be found on the free site.

Lets go to the Intact Financial Ranking page.

All metrics and data analytics fields shown in this page are updated daily (Monday to Friday) based on the latest market data for Intact Financial.

Notice the navigation buttons at the top of the page. These allow jumping to the start of each section, making it easier to compare information between each section on the page.

Scroll down the page to review some of the metrics we use.  Go to section “Intact Financial Common Share Metrics”.  As you can see the current yield on the common is 2.23%. 

In the section “Intact Financial Overall Preferred share Metrics” we see the following metrics

–Lowest Current Yield: IFC-F @ 3.49%

-Highest Current Yield: IFC-G @ 6.12%

-Average Current Yield: 4.96%

–5YR Reset Average Yield: 3.70%

Lets see the averages for the Canadian Preferreds Market and The Insurance Sector. From the menu select “Market Review”.  As you can see Today’s Average Market Yield is 5.4318%. Intact Financial’s average preferred yield is about 0.5% higher.

In The section “statistics by sector” locate the insurance sector. The sector has an average Current Yield of 5.04% and Reset Yield of 4.20%. Intact Financial is lower in both of these metrics.

Let’s go back to the “Rank Intact Financial Preferreds Page” and the “rank – compare tool”.

In the section “Rank Intact Financial Preferreds – Compare Tool, you can see that we have a lot of metrics, but for this decision we choose to use the “blended Yield” only.

The “blended yield” is a projection of the average yield for the next five years.  We will be comparing this to a similar metric of the common stock. 

To begin with, let’s review the table by “Blended Yield” (highest yield 1st). As you can see IFC-F preferred  has the following yields: current(5.22%); reset(5.22%); and blended(5.22%). 

So the best blended yield you can expect at this point from the preferreds is 5.22%, if you pick IFC-F based on today’s unit price and interest rates.

Click on the button “Common or Preferred”. Here you can see that Intact Financial has a history of increasing the common stock dividend by 10.84%.  This is based on a 16 year history of increases starting in 2005.   It ranges from a quarterly dividend of $0.163 in 2005 to $0.829 in 2020. Looking at the dividend growth rate graph you notice a consistent increase of the dividend. 

Based on the current Compound Annual Growth Rate of the Intact Financial dividend I calculate the future quarterly dividend for the next 5 years to be $0.919, $1.019, $1.130, $1.252, $1.388. Assuming the Stock price remains the same $148.88 over the next 5 years, the corresponding yields will be 2.471%, 2.739%, 3.036%, 3.365%, 3.730%. 

One last item is to check the short position. Currently this is 0.84%. Lets see whats the short position is on a few more preferred share issuers: SLF(3.04%%) , MFC (2.23%). Intact short position is much better than both of these, so there are no red flags.

There are many metrics that can be taken into consideration when making your decision. Each investor will assign different importance to each metric. For this video we are only using the expected yield for the next 5 years. Based on that it’s a clear decision. The best you will get from the preferred is 5.22%. On the other hand the common has a current yield of  2.23% and  will provide you with increasing yields each year projected to be 2.471%, 2.739%, 3.036%, 3.365%, 3.730%.