MCAN Financial has a lot of needles to thread. And it has the experience to do it successfully

MCAN Financial Group Total assets (2024) $5.3 billion Profit (2024) $77.6 million Three-year share price gain 2.

3% P/E ratio (trailing) 8.9 MCAN fills a lot of niches. It bills itself as Canada’s largest mortgage investment corporation (MIC), although it’s the only MIC that’s federally regulated.



That means its deposits are insured by the Canada Deposit Insurance Corp., allowing it to gather money at lower cost than rivals. Derek Sutherland took over as CEO on April 1, after serving as interim CEO for four months and board chair since 2020.

Basically, MCAN is not a Big Six bank, but it has a lower risk profile than other MICs. MCAN is also much nimbler than a big bank and, in many ways, has better growth prospects. It only has about one-half of one-quarter of the Canadian mortgage market, and “maybe 1% to 2% on the mortgage broker side,” says Sutherland.

“So for us to grow, it doesn’t take a lot.” Adding $500 million in assets would mean 10% growth, whereas Bank of Montreal would have to add $145 billion. And MCAN has increased its mortgage assets from $2.

4 billion in 2020 to $4.9 billion last year. Sutherland says MCAN really doesn’t compete for the same borrowers as banks, either.

It’s more inclined to deal with people who have bruised credit histories or who may have suffered an adverse life event like divorce. “We can get our heads around that,” he says. But it’s not a sub-prime lender, and its average loan-to-value ratio at mortgage origination is just 65%.

There’s now also a third leg to the company: MCAN Capital, its residential construction and investment business, “where we get better returns,” Sutherland says. Threading several needles takes a lot of experience, and Sutherland, who’s 53, says he’s been absorbing lessons since he was a kid. His father was involved with predecessor companies in the 1980s.

MCAN’s first IPO was in 1992, and Sutherland joined in 2004. Many real estate challenges today are geographic. Counting mortgage and corporate loan portfolios, MCAN has 72.

4% of its holdings in Ontario and 15.7% in British Columbia –markets that look pricey. Sutherland says that’s where “the discipline of underwriting” comes in.

Sutherland thinks MCAN is a classic growth-at-a-reasonable-price proposition. But many real estate investors want hefty income. MCAN has boosted its annual dividend to $1.

64 from $1.13 a share over the past 10 years, and paid out special dividends in 2021 and 2022. That’s a yield of almost 9%.

“As an investor,” he says, “I’d buy that.” Your time is valuable. Have the Top Business Headlines newsletter conveniently delivered to your inbox in the morning or evening.

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