Friday, May 10, 2013

Power Financial Corp 2

I own this stock of Power Financial Corp (TSX-PWF, OTC-POFNF). I first bought this stock in 2001 and then bought more in 2004 and most recently in 2011. I have made a return of 7.43% per year on this stock, with 3.1% per year from capital gains and 4.33% per year from dividends.

When I look at insider trading, I find insider selling at $233M and no insider buying. However, all insiders selling is by directors and a lot of it seems by one director Robert Gratton. Robert Gratton probably had enough shares and options to cover all that was sold by directors. There is a story about Robert Gratton retiring at He would be older than 65.

The 5 year low, median and high median Price/Earnings Ratios are 10.57, 12.11 and 16.04. I get a current P/E Ratio of 11.69 based on a stock price of $30.52 and 2013 earnings of $2.61. This would suggest a reasonable stock price.

I get a current Graham Price of $31.23. The 10 year low, median and high median Price/Graham Price Ratios are 0.91, 1.12 and 1.24. The current P/GP Ratio is 0.98 and this also suggests a relatively reasonable stock price. (On an absolute basis, a stock is of good value when the P/GP Ratio is at 1.00 or below.)

The 10 year Price/Book Value per Share Ratio is 2.22 and the current P/B Ratio is at 1.84 is 83% of the 10 year median and this ratio suggests a reasonable stock price. (For the stock price to be cheap, the current P/B Ratio would have to be only 80% or less of the 10 year median P/B Ratio. It is getting close, but it is not there yet.)

The 5 year median dividend yield is 5.05% and the current dividend yield is 4.59%. The current dividend yield is 9% lower than the 5 year median dividend yield. The current dividend yield suggests a reasonable stock price. To show a cheap stock price, you would want a dividend yield a lot higher than the current dividend yield.

When I look at analysts' recommendations, I find Buy and Hold recommendations. The consensus recommendation would be a Hold. Most of the recommendations are a Hold recommendation. The 12 months stock price consensus is $31.40. This implies a total return of 7.47% with 4.59% from dividends and 2.88% from capital gains.

It was not that long ago that a lot of people felt that this was a good dividend paying company to buy. See the Passive Income Earner blog on this company in March of 2011. It is a diversified financial company and the dividend is safe. I will continue to hold and collect my dividends from this company until the economic situation gets better and this company will again be a very good one to buy as well as to hold.

However, I would not suggest buying this stock unless the stock price turns cheap. This would mean that current ratio would be lower than the median low ratios. For example, if the current P/E was lower than the 5 year low median ratio of 10.57. It will be a while before this stock sees a recovery. See my spreadsheet at pwf.htm.

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. Its web site is here Power Financial.

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 or StockTwits.

1 comment:

  1. This is probably the only stock that you hold that I will never ever invest in.