Great-West Lifeco Inc. 2

I do not own this stock of Great-West Lifeco Inc. (TSX-GWO, OTC-GWLIF). This stock seems to be a favorite with investors who like solid, stable, dividend paying stock. It was on Mike Higgs' list and it used to be on the dividend lists. I have been following this stock for some time however, I will not buy it because I have Power Financial Corp. (TSX-PWF). Great West Lifeco Inc. is one of the companies under the Power Financial Corp. and Power Corp. (TSX_POW).

When I look at insider trading, I find insider selling of $4.6M and insider buying of $0.5M with net insider selling at $4.1M and this is only 0.01% of market cap and so very small. There is some insider ownership with the CEO having shares worth around $4.4M, the CFO having share worth $7.5M, an officer having shares worth around $64.3M and a director having shares worth around $11.5M.

One thing that is noticeable in this report is that there are a lot of insiders who have options. In 2013 outstanding shares were increase by just over 2M with a book value of $57M and this number of shares was worth $66.5M by the end of 2013. This number of shares was 0.20% of outstanding shares at the end of 2013 so is a reasonable number.

The 5 year low, median and high median Price/Earnings per Share Ratios are 10.49, 12.29 and 14.51. The corresponding 10 year values were at 12.53, 14.26 and 15.70. The current P/E Ratio is 12.88 based on a stock price of $32.20 and 2014 EPS estimate of $2.50. This stock price test suggests that the stock price is relatively reasonable.

I get a Graham Price of $26.51. The 10 year low, median and high median Price/Graham Price Ratios are 1.01, 1.25 and 1.37. The current P/GP Ratio is 1.21. This stock price test suggests that the stock price is relatively reasonable.

I get a 10 year median Price/Book Value per Share Ratio of 2.20 and the current P/B Ratio is 2.58 based on a stock price of $32.20 and BVPS of 12.50. The current P/B Ratio is some 17% higher than the 10 year median P/B Ratio. This stock price test suggests that the stock price is relatively reasonable, but the stock price is near the high end of the reasonableness range. The problem here is that the company is not growing the book value. The recent recession has been tough on insurance companies.

The 5 year median dividend yield is 5.38% and the current dividend yield at 3.82% is some 27% lower and this would suggest that the stock price is relatively expensive. However, the historical average dividend yield is 3.94% and the historical median dividend yield is 3.02%. Over the last 5 years the dividend yields are been quite high. Using the historical dividend yields in price testing suggests that the stock price is relatively reasonable to relatively cheap.

When I look at analysts' recommendations, I find Strong Buy, Buy and Hold recommendations. The Hold recommendation is the most common one and the consensus recommendation is a Hold. The 12 month consensus stock price is $33.70. This implies a total return of $8.48% with 4.66% from capital gains and $3.82% from dividends.

A recent article in the Winnipeg Free Press talks about Great West Life acquiring PDAssure. A press release on News Wire talks about a US subsidiary making the acquisition of the J.P. Morgan Retirement Plan Services large-market recordkeeping business.

Sound bit for Twitter and StockTwits is: Insurance stock at reasonable price. The time to buy stocks are when they are cheap to reasonable. Analysts do not expect much for this stock at the present and if a stock or sector is out of favour, it is a good time to have a look at the stock or sector. Insurance stocks are out of favour because they have had a hard time with the low interest rates. However, low interest rates will not last forever. See my spreadsheet at gwo.htm.

This is the second of two parts. The first part was posted on Monday, September 29, 2014 and is available here. The first part talks about the stock and the second part talks about the stock price.

Great-West Lifeco is a financial services holding company with interests in the life insurance, health insurance, retirement savings, investment management and reinsurance businesses. The Corporation has operations in Canada, the United States, Europe and Asia through The Great-West Life Assurance Company, London Life Insurance Company, The Canada Life Assurance Company, Great-West Life & Annuity Insurance Company and Putnam Investments, LLC. Lifeco and are members of the Power Financial Corporation group of companies. Its web site is here Great West Life.

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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