Wednesday, May 26, 2010

Power Corp

This is also a great stock (TSX-POW) to review, as it is a good dividend paying stock. It is also on the dividend lists that I follow of Dividend Achievers and Dividend Aristocrats (see indices).

I do not own this company as I have Power Financial. It makes no sense to hold both. Some people like this company better than Power Financial, because as a holding company it is not just financial. The financial section is balanced by other holdings and, it is felt, this makes Power Corp a safer and less volatile company to hold. Both of these companies have a reputation of providing great dividend returns. I personally like financial companies as I feel they give a better long term return.

This company is no slouch when it comes to dividend growth. The 5 and 10 year growth in dividends is 16% per year and 16.8% per year respectively. I also should mention that, like a lot of companies, this company did not raise their dividends in 2009. However, because the last increase was late in 2009, an investor would have received 4.4% increase in dividend returns in 2009. If you had purchased this stock at an average price 10 years ago, you would be making a return of 8.2% on your investment. An investment at an average price would have earned you a total return of 8.2% per year. If you purchased this stock at the year end, that 10 year total return would be 12.3% per year. This is why people so like dividend paying stock.

Even if you had purchased this stock just 5 years ago at an average price, you would be making a return on your original money of 3.7%, but little total return per year. This is not quite so happy a picture. Still you will have money coming in on this stock while you wait for better times. The thing is, if you start saving for retirement in a reasonable time frame with these dividend paying stocks, you could do quite well and could weather the ups and downs of the stock market.

The growth figures for this stock are the generally not so great area at the present time. On this stock, the 10 year growth figures are better and in some cases, much better than the 5 year growth figures. For example, the earnings growth for the last 5 years being in negative territory, with the 10 year growth in earnings is barely better at 1.7% per year. In the cash of cash flow, the 5 and 10 year growth are very different. The 5 year average growth is just 4.9% per year, but the 10 year average growth is a great 28% per year.

The 5 year average Return on Equity at 11.6% is not bad. The last two years of ROE were low at 7% each year. In regards to the Accrual Ratio, it has been always low and unremarkable. The Asset/Liability Ratio is a bit low at 1.20, but this is rather typical of this type of company. I guess the last thing to say, is that I will not buy this stock for the simple reason I have Power Financial Corp, and it makes no sense to have both Power Financial Corp and Power Corp.

This company is an international management and holding company. It has as subsidiaries Power Financial Corp., Power Technology Investment Corp. and Gesca Ltee. The Pargesa Group holds significant positions in five large companies based in Europe of Total (energy), Suez (energy, water, and waste services), Imerys (specialty minerals), Lafarge (cement and building materials and Pernod Ricard (Wines and Spirits). Gesca holds a 100% interest in the Montréal daily newspaper La Presse and six other daily newspapers in the provinces of Québec and Ontario. Gesca also produces television programming, publishes specialty magazines and books, and operates several Internet sites. Controlling shareholder of Power Corp of Canada is Paul Desmarais. They have 30.1%, but have 64.6% voting control. Its web site is here Power Corp. See my spreadsheet at pow.htm.

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 for stocks followed and investment notes. Follow me on twitter.

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