Thursday, May 9, 2013

Power Financial Corp

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.

This is not a great return, but not really bad considering the problems all life insurance companies are having at the moment because of very low interest rates. As with a lot of companies, they have struggled since 2008 problems. This company, which prior to 2008 had a very good history of increasing their dividends, has not raised them since 2008. Unfortunately no analyst following this stock expects any dividend increases this year or next.

The rate of increases in dividends before 2008 averaged around 16% per year. The 10 year growth in dividends is still good at 10.41, but the 5 year growth is low at 3.8% and will soon be non-existent. The Dividend Payout Ratio has been climbing for earnings. The 5 year median is around 66%. It used to be below 40%. The DPR for cash flow has not changed much over the years and the 5 year median DPR for cash flow is at17%.

The outstanding shares have increased by 0.12% and 0.23% over the past 5 and 10 years. These are really only marginal increases. The shares seem to be increasing due to stock options. Revenue has recently been increasing and the 5 and 10 year growth is 2.5% and 5.7% per year. Revenue per Share is similar with growth at 2.4% and 5.4% per year.

This company is having problems growing its earnings and Earnings per Share have fallen by 3.9% per year over the past 5 years. EPS has grown at 5.5% per year over the past 10 years. Cash Flow per Share has done better and has grown at1.5% and 12.2% per year over the past 5 and 10 years. (However, if you look at 5 year running averages, cash flow growth is much better at 6% per year and 18% per year over the past 5 and 10 years.)

The return on equity is better for 2012 than it has been for a number of years, coming in at 12.1%. The 5 year median ROE is just 7.5%. The ROE on comprehensive income is not much different coming in at 11.2% for 2012 and with a 5 year median ROE of 7.3%.

The Liquidity Ratio is quite good at 2.31. The Debt Ratio at 1.10 is good for an insurance company, although traditionally this company used to have higher Debt Ratios with the 5 and 10 year median ratios at 1.17 and 1.18. The Leverage and Debt/Equity Ratios at 11.02 and 10.02 respectively is fine for an insurance company and in line with historical ratios.

This company has been slowly recovering from 2008 problems, but as with most life insurance companies, interest rates will probably have to improve before it will become a dividend growth company again. In the meantime, I am getting a yield on my money of around 5% and this is higher than historical norms for this company where yield were closer to 3% or lower. 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. I bought PWF and MFC June 2008, I am still underwater 11% on my shares but plan to keep holding. I didn't sell it because they didn't cut the dividend like MFC, which I sold.

  2. With insurance stock you can look on them as having a good yield while you wait for them to recover. They will not recover until interest rates become more normal and who knows when that will be.

    I have both PWF and MFC and will continue to hold both.