Friday, May 13, 2011

Power Financial Corp

I first bought this stock (TSX-PWF) in 2001 and then some more in 2004. My total return has been 8.14% per year. The dividend portion of this total return would around 4%. This company used to have a good record of increasing it dividend each year and it used to be on the dividend lists that I follow.

However, as with other Canadian Life Insurance companies, this company has not raised their dividends since 2009. The growth in dividends over the past 5 and 10 years is still high at 10% and 14.5%. I can find no indication when they might raise dividends again. Their Payout ratios based on earnings and cash flow are coming back down to levels that are more reasonable.

The total return for this company over the past 5 and 10 years has been at 2.2% and 9.8% per year. The dividend portion of this total return would be around 3.9% per year. The 5 year total return has been lousy, but all Canadian Life Insurance companies have had a rough time of it during this past recession. The best that can be said is that at least the 5 year return is positive.

The growth figures for this company have not been great over the past 5 years but the 10 year growth figures have mostly been fine. Take the cash flow; the growth over the past 5 years is at 4.7% per year. My spreadsheet shows the 10 year growth at 30% per year, but that is only because 10 year ago was a poor year. The real growth is closer to 19% per year, which is still a very good growth rate.

Growth in revenues over the past 5 and 10 year is quite low at 4.3% and 6.8% per year. However, analysts seem to feel that there will be much better revenue growth for 2011 and 2012. As far as I can see, revenues for the first quarter of 2011 are down from those of the first quarter of 2010.

The Asset/Liability Ratio is lower for the first quarter of 2011 at 1.10 than it has been for sometime. What is complicating matters is that this company is now reporting using the IFRS accounting rules, in place of the Canadian GAAP accounting rules. Under these new rules, Leverage Ratio has doubled between 2010 and the 1st quarter of 2011, from 12.81 to 22.89. The same thing has happened to Debt/Equity Ratio, which has gone from 10.83 to 20.31. This is quite a change and it is hard to know the real effect of these accounting rule changes being made.

I am pleased with my investment in this company and believe it will be a good long term investment for me.

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.

1 comment:

  1. Nice post.

    I like PWF. I think dividends will continue to flow for many years to come based on their structure. My wife now holds PWF in her TFSA, for the dividends of course :)

    BTW - You've probably missed some blogposts from me in recent weeks, because I finally managed to create my own site:

    Please re-subscribe to my new site and of course, stay in touch Susan!