Power Financial Corp. 2

On my other blog I am today writing about one reason to buy blue chip stocks continue...

I own this stock of Power Financial Corp. (TSX-PWF, OTC-POFNF). When I sold my CIBC bond I had money to spend. This was a stock on my hit list and was selling at a reasonable price. This stock was on Mike Higgs' dividend growth stocks and that is why I started a spreadsheet to investigate this stock in the first place.

The insider trading report shows insider selling in June of 2013 of some $86M worth of shares. There is no insider buying. For insiders there are not only stock options but also other stock option type vehicles called Deferred Share Units, Performance Deferred Share Units and Performance Share Units. The Performance Units seem only for the CEO.

There is some insider ownership with the CEO owning shares worth around $14.3M and a director having shares worth around $37M. Although, I must say that same director had shares worth around $114M last year. The Desmarais family still own a lot of shares worth around some $16.7B. There is an article in the Financial Post of the Desmarais family selling shares in January of this year.

The 5 year low, median and high median Price/Earnings per Share Ratios are 10.38, 12.11 and 13.94. The current P/E Ratio is 11.66 based on a stock price of $34.28 and 2014 EPS estimate of $2.94. This stock price test suggests that the stock price is reasonable and towards the lower end of the reasonableness range.

I get a Graham Price of $36.20. The 10 year low, median and high median Price/Graham Price Ratios are 0.91, 1.24 and 1.12. The current P/GP Ratio is 0.95 based on a stock price $34.28. This stock price test suggests that the stock price is reasonable and towards the lower end of the reasonableness range. Also a stock is considered cheap on an absolute basis when the P/GP Ratio is 1.00 or below.

The 10 year Price/Book Value per Share Ratio is 1.87. The current P/B Ratio is 1.75 based on a stock price of $34.28 and a BVPS value of $19.81. The current P/B Ratio is around 8% lower than the 10 year median ratio. This stock price test suggests that the stock price is reasonable.

The 5 year median dividend yield is 5.05% and the current dividend yield at 4.08 is some 19% lower. This stock price test suggests that the stock price is expensive. However, dividend yields have recently been rather high for this stock.

The historical average dividend yield is 3.85% a value that is 7% lower than the current dividend yield. The historical median dividend yield is even lower at 2.97% and this yield is some 37% lower than the current dividend yield. This stock price testing suggests that the stock price is reasonable to cheap.

The analysts' recommendations are Buy and Hold. The consensus recommendation would be a Buy. The 12 month target stock price is $38.60. This implies a total return of $16.69% with 12.6% from capital gains and 4.08% from dividends.

There is a Global Post article talking about this company having a good first quarter in 2014. Sunny of The Dividend Girl site does not like this company. She has a unique view of the world. The blog called How To Invest Online shows a unique view of Canadian stocks. He looked at what stocks were in Dividend ETFs. This company was included in a lot of ETFs.

The stock market always looks to the future. People see that insurance companies are starting to revive and they are pushing up the stock prices because they see a better future for these companies. Stock prices tend to revive prior to an industry reviving. This is common. For insurance companies to do really well, we need to see better interest rates.

You will know that life insurance companies have revived when they start again to raise their dividend payments. I am continuing to hold my shares in the Life Insurance companies I own. I think that I will do well in the longer term and I am a long term investor. See my spreadsheet at pwf.htm.

This is the second of two parts. The first part was posted on Friday, April 16, 2014 and is available here. The first part talks about the stock and the second part talks about the stock price.

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. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.

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