Friday, May 21, 2010

Power Financial Corp

This is a great stock (TSX-PWF) 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 bought this stock first in 2001 and some more in 2004. I have earned a total return of 8.4% per year on this stock. This is not bad since stock prices are still depressed. The current stock price is about 25% below the peaks of 2007. My total returns would include some 3% per year in dividend income. This company is basically into life insurance and all life insurance companies were hit hard in this last recession. The company did not raise their dividends for 2009. The dividends where higher in 2009 than they were in 2008 as there was a dividend increase at the end of 2008.

The growth in dividend for this stock has been great. The 5 and 10 year growth rates are 14% and 16.6% per year, respectively. The growth in dividends between 2008 and 2009 at just 5% was the lowest I have seen and my spreadsheet tracks this stock back to 1993. The company, so far this year, has not stated if there will be an increase this year. All that analysts mention is that the current dividends are safe.

Most of the 5 and 10 year growth figures are good. All the exceptions to this has 5 year growth rate much lower than the 10 year growth rate. The 5 and 10 year growth in earnings were -2% and 5% per year, respectively. The last two years have not been great for this company. This year, 2010, is expected to be much better. My estimated earnings for 2010 have been declining. After the 2009 annual report was in, earnings for 2010 declined from $2.85 to $2.59. After the latest quarterly report, they again declined from $2.59 to $2.53.

The growth in revenue and cash flow from operations was better for the last 10 years, than for the last 5 years. This is mainly due to the fact that this company has been hard hit by the latest recession. The 5 and 10 year growth in revenue is 6.5% and 8.5% per year respectively. The cash flow growth for the last 5 and 10 years is 5.8% and 14.9% per year respectively. Growth in revenue and cash flow are both important for long term growth in a company and in its dividends.

When I look at the Asset/Liability Ratio, I get one of 1.19. This is not great, but is typical of this sort of financial firm. They have enough assets to cover the liabilities. The Leverage (or Asset/Book Value) is also a bit high at 10.6, but not unreasonably high. The Return on Equity is still good and the ROE for the first quarter of 2009 at 12% is better than for 2009, which was 10%. The last thing to mention is the Accrual Ratio and this is good as the Total Accruals is negative, which is what you want to see.

I am please with my investment in this stock. I will not be buying more for the simple reason I already have enough of this stock in my portfolio. I will continue to hold this stock and continue to track it.

This company is a holding and management company. Its operations provide a range of individual and corporate financial and fiduciary services in North America and Europe. It holds interest in the following companies: Great-West Lifeco, Great-West Life, London Life, Canada Life, Great-West Life & Annuity, Putnam Investments, IGM Financial, Investors Group Mackenzie Financial, and Pargesa Group. 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 Financial. See my spreadsheet at pwf.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.

No comments:

Post a Comment