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  5. FN: A number of years ago I held Timbercreek, and got the nice dividend plus some minor capital gains before selling. [First National Financial Corporation]
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Investment Q&A

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Q: A number of years ago I held Timbercreek, and got the nice dividend plus some minor capital gains before selling. I am now looking at it again - or something similar like FN or MKP. Could you comment on the outlook for the mortgage companies in general in the current environment (assuming rates continue to go down), and also if we should enter a recession. Would you buy one of these companies today, with income the primary objective, and how (and why) would you rank these 3? Is there a better option in this category?
Thank-you
Asked by grant on September 23, 2024
5i Research Answer:

We continue to think FN is the best of the group, for its larger size, management, valuation, historical performance and prospects. Lower interest rates spur demand for mortgages, but there can be sentiment and valuation changes (negative) if investors fear a worse-than-average recession. That being said, FN and most of the others have handled past cycles well. Note it is a competitive, fairly low growth industry, so we would enter this sector for income only, and take any capital gains as a bonus. We would rank: FN, TF, MKP. We would be comfortable buying FN today for income.