Power Corp of Canada

I do not own this stock of Power Corp of Canada (TSX-POW, OTC- PWCDF). I started following this stock because it was on the Dividend Achievers, the Dividend Aristocrats lists and also on Mike Higgs' list. I would not buy it because I have shares in Power Financial, which this company controls.

This stock used to be a dividend growth stock. However, the company is heavily invested in insurance companies and mutual fund companies and these companies have had a hard time since 2008. Most of these companies have discontinued dividend increases. Some analysts have thought that the company will raise dividends in 2014 however they have so far paid two dividends and have not yet mentioned any dividend increase.

Dividend Payout Ratios were lower before 2008. The DPR for EPS was around 30% to 35%. They hit a peak in 2009 at 83%. In 2013 the DPR for EPS was 56%. It is expected to be around 44% in 2014. Before 2008 the DPR for CFPS was around 12%. This hit a peak in 2008 at 14% and for 2013 it was around 9.6%.

The stock price is down some 7% since the end of 2013. This shows up in the total return to date which is quite a bit lower than it was to the end of 2013. The total return to date over the past 5 and 10 years is at 4.24% and 3.11% per year. The portion of this return attributable to dividends is at 3.95% and 3.56% per year. The portion of this return attributable to capital gain or loss is a gain of 0.29% over the past 5 years and a 0.45% loss per year over the past 10%.

This shows up one of the strengths of dividend paying stock. These sorts of stocks can retain their value. Basically all the total return for some time now has been in the dividends paid. For the risk adverse investors, dividend paying stocks over the long term can give some security and stability. Mind you, the stock has not gained much but I feel that it will again be a dividend growth stock. I just do not know when this will happen.

The outstanding shares have not changed over the past 5 and 10 years. Shares have increased due to stock options and decreased due to Buy Backs. For this stock revenue growth has been low; earnings growth is not good; but cash flow has been growing.

Revenue per Share has grown at the rate of 1.5% and 6.3% per year over the past 5 and 10 years using the 5 year running averages. EPS has decreased by 4.8% and increased by 1.6% per year over the past 5 and 10 years using the 5 year running averages. Cash Flow per Share has increased 4% and 16.7% per year over the past 5 and 10 years using the 5 year running averages.

The Return on Equity was below 10% twice in the last 5 years. The ROE for 2013 is at 10.2% and the 5 year median ROE is 10.2%. The ROE on comprehensive income for 2013 was much better at 18.9%. However, the 5 year median ROE for comprehensive income is much lower at 8.5%.

The Liquidity Ratio is good for this company at 2.29 for 2013. However, this ratio is not very important for financial companies. The Debt Ratio at 1.09 is fine for a financial company. The Leverage and Debt/Equity Ratios are usually high for financial companies but they are still very high for this company and have been for the last 3 years. The ratios for 2013 are at 32.69 and 29.91. Prior to 2008 they were at a more acceptable level around 15.00 and 12.00, respectively.

This company has been making progress since the financial crisis of 2008. They have done better in growing earnings and cash flow than revenue over the past few years. However, analysts' feel that revenue will grow this year and if you compare the 12 months to the end of 2013 and to the end of the first quarter, revenue is up by 9.3%.

I will not be investing in this company as I have shares in Power Financial Corp. which is a subsidiary of Power Corp. I will continue to track this stock. This is because I own shares in Power Financial Corp and because my son has stock in Power Corp. See my spreadsheet at pow.htm.

This is the first of two parts. The second part will be posted on Friday, June 20, 2014 and will be available here. The first part talks about the stock and the second part talks about the stock price.

Power Corporation of Canada is a diversified international management and holding company with interests in companies in the financial services, communications and other business sectors in North America, Europe and Asia. Some of it subsidiary companies include Power Financial, the Pargesa group and Gesca and Square Victoria Digital Properties. Its web site is here Power Corp.

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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