Genworth MI (TSX: MIC) will be reporting earnings at the end of the month. They are likely to continue seeing historically high rates of mortgage conformance and as a result, they should be reporting a decent quarter as they continue to book earned premiums. Canadian unemployment continues to be steady (if not trending slightly down), which also suggests continued mortgage conformance in the future.
The other financial note is that the company spent $55 million repurchasing 1,892,643 shares at an average price of $29.06. They did this between September 3, 2013 to September 23, 2013. Not factoring in any dilution, this repurchase is about 1.96% of the outstanding shares. There is a market value to their share price where returns of capital are probably best given in dividends rather than buybacks, and it is very close to the $30 price range where I’d consider dividend increases would be a more efficient mechanism. Notably this time around, trading volumes were considerably higher than average. The public float of Genworth MI is only 43% of the total shares outstanding because the parent Genworth Financial owns 57% of the company, so the net buyback from the float was about 810,000 shares.
The buyback will alleviate the company from paying out $2.4 million a year in dividends at their current rate, or about a 4.4% yield, which is slightly better than their own investment portfolio, which at the end of June 30, had a book yield of 3.6% and coincidentally, a duration of 3.6 years.
I still believe the market is still placing a significant discount on the general perceptions of the over-valuation of the Canadian real estate market and other factors. While some of these concerns may have mid-term validity, they do not today.
Do you have a number in mind for selling this one off?
I took your advice (after my own dd) and bought this one at $17
Still holding on!
Certainly if it got to $40 I’d dump it, but I doubt it will be getting there anytime soon. Whether a liquidation value is between $31 or $40 is a grey question.
The CRA is also playing with my mind on this one in terms of the deferred tax liability that is currently on my own ledger. I’d prefer to realize it in 2014.
Right now there is little danger in holding on (I even get the sense that the “end of the Canadian real estate market” headlines are dissipating) and the momentum traders can hopefully take it up further before I try executing a liquidation.