CI Financial Corp. boosted its dividend on Tuesday even as the fund manager reported a sharp drop in net income for the first quarter due to declining markets.

Net income for the quarter ended March 31 fell to $58.8 million, down 58% from $139 million in the year-ago period.

Earnings per share fell to 20¢, down 60% from 60¢ a share in the first quarter of 2008.

“As ugly as the first quarter was, I think we managed it very, very well here at CI,” said CEO William Holland in a conference call on Tuesday. He pointed out that the company’s financial results had improved from the fourth quarter of 2008, including a 5% boost in earnings.

Net sales of managed funds fell to $178 million during the quarter, down 65% from net sales of $506 million a year ago.

Redemptions in the first quarter fell 24% to $1.9 billion from the fourth quarter of 2008 – an encouraging sign, according to Holland.

“Redemptions stayed at historical low levels,” he said.

Fee-earning assets at March 31 were $78 billion, down 23% from $101.6 billion one year ago.

Fee-earning assets during the first quarter were comprised of $49.1 billion in investment funds and pools at CI Investments Inc. and United Financial Corp., $378 million in structured products, $3.7 billion in institutional managed assets, $23.9 billion in dealer assets under administration at Assante Wealth Management (Canada) Ltd. and Blackmont Capital Inc., and $0.9 billion in other fee-earning assets.

CI’s segregated fund business has grown steadily, and now comprises more than 22% of the company’s total assets under management, Holland pointed out.

“This is, by a mile, our most profitable business,” he said.

Holland noted that a slew of cost-cutting efforts by CI last year – totaling $45 million in savings – were beneficial to the company’s results in the first quarter.

“I can’t say that we can identify any real negative impact from those reductions,” he said.

Noting the recent upturn in equity markets, Stephen MacPhail, CI president, commented “Since the lows on March 9, 2009, CI has seen its assets under management increase by $10 billion.”

The company has witnessed a surge in sales as stock markets have rallied, including $82 million of net sales in long-term funds in April, and continued growth into the month of May.

“Sales are picking up considerably over the last three or four weeks,” said Holland.

CI announced a change in its dividend policy to paying a monthly dividend of 5¢ a share. The firm had previously stated its intention to pay a quarterly dividend of 12¢ a share.

“The growth in earnings from our assets combined with CI’s continued strength in sales has positioned us to significantly increase our dividend,” MacPhail said.

CI’s board of directors declared a dividend of 10¢ share, representing payments for April and May, payable on June 15, to shareholders of record on May 31.

Dividends of 5¢ a share were declared payable on July 15 and August 14, to shareholders of record on June 30 and July 31, respectively.

CI says the change in dividend policy represents an effective increase of 25% in the dividend rate.

The monthly dividend of 5¢ a share represents a yield of 3.5% on CI’s closing share price of $17.20 on May 11.

IE

IE