Wednesday, September 16, 2009

Great-West Lifeco Inc 2

I am reviewing this stock (TSX-GWO) today as I have not yet reviewed it and the 2008 year end annual statement has came in. I do not own this stock, but I follow it. It is a favorite with investors who like solid, stable, dividend paying stock. However, if you are investing in Power Financial or Power Corp, you should be aware that this company is mostly owned by Power Financial, which is mostly owned by Power Corp.

When I look at Insider Buying and Insider Selling under this stock, I find for the past year, there was twice as much selling as buying. However, the selling off occurred about September 2008 and there was been more buying than selling since that time. There has been recent buying and the keeping of options since this stock started to rise from the lows of March 2009. This is a positive sign.

When I look at the P/E ratio, I get a current P/E of just over 13. The 5 year average low is about 13. So, the P/E points to a good current price. The forward P/E is just over 10, so this is very good. However, these values are based on what the company is expected to earn in 2009 and 2010, and therefore may or may not be true. It depends on how accurate the estimates I am using. However, I have seen other sites point to a future P/E of around 10.

The current yield is 4.8% and this is higher than the 5 year average of 3.2%. The Price/Book Value was at 55% of the long term average in 2008 and is currently at only 70% of the long term average. These are both good. The current Graham Price is 5% lower than the stock price because of this company is expected not to earn much this year. However, if you look at the Graham Price for 2010, then the price is 10% lower than the Graham Price. Since the book value has always been increasing, the Graham Price is very much affected by what is expected in earnings this year. So it is fair to say that the stock price is close to the Graham Price and this is good.

For the short term and up to the last 5 years, the Financial Index has been under performing the TSX. If you look at the longer term, say 10 years then the Financial Index has done better. However, going even longer term, the indexes are pretty even. This stock’s performance has been, for terms of 10 years and less, in line or slightly below the performance of the Financial Index. The thing to remember when comparing this stock to the TSX, the dividend payments has increased this stock total performance by almost 4% per year.

When I look at analysts’ recommendations, the consensus is a Buy. There are a number of analysts that follow this stock with most recommending a Buy, but there are some Strong Buys and a few Hold ratings also. There are no other recommendations for this stock that I can find. (See my site for information on analyst ratings.) The thing to note is that with most buy consensus ratings, the actual ratings cover ones from Strong Buy to Hold. You will seldom, if ever see a stock with no Hold ratings. The best you will see is more Buys and/or Strong Buys than Holds.

I can see why people like this stock. It is solid, conservative and provides a great dividend. It would also seem that the stock is very reasonably priced. I will not be buying it as I already have sufficient stock in Power Financial.

Great-West Lifeco is a financial services holding company with interests in the life insurance, health insurance, retirement savings, investment management and reinsurance businesses. The Corporation has operations in Canada, the United States, Europe and Asia through The Great-West Life Assurance Company, London Life Insurance Company, The Canada Life Assurance Company, Great-West Life & Annuity Insurance Company and Putnam Investments, LLC. Lifeco and are members of the Power Financial Corporation group of companies. Power Financial Corp owes 65% of this company. Its web site is See my spreadsheet at

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website at for a list of the stocks for which I have put up spreadsheets.

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