Great-West Lifeco Inc.

On my other blog I am today writing about RRIFs and LRIFs continue...

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).

As with a lot of insurance companies, this company's dividends have been frozen for some time. The last dividend increase was in 2009. Manulife Financial Corp (TSX-MFC) was the first company to restart dividend increases and they did that this year. However, I believe Manulife Financial was the only insurance company to cut dividends rather than just freeze them.

I believe that insurance companies will eventually begin increasing dividends on a regular basis, but it is hard to say when. One of the problems is the low interest rates and it is hard to say when this will change. People seem to be expecting interest rates will go up, but it has not happened yet.

What seems to have happened is that Insurance companies' stock prices started to rise in 2012 in anticipation of better times. Although the stock price increases seems to have now stalled. Investors still did ok on this over the past 5 and 10 years with total returns of 7.95% and 5.85% per year. The dividend portion of these returns was at 4.28% and 3.89% per year. The capital gains portion of these returns was at 3.68% and 1.96% per year.

The outstanding shares on this stock have increase by around 1% per year over the past 5 and 10 years. If you look at growth, for revenue and cash flow growth is better over the past 10 years than over the past 5 years. For earnings, growth is better over the past 5 years than past 10 years, unless you look at 5 year running averages and then growth is better over past 10 years than last 5 years.

Revenue has declined by 4% per year over the past 5 years and has grown at 6.9% per year over the past 10 years. EPS has grown at 8.2% and 4.6% per year over the past 5 and 10 years. For EPS if you use 5 year running averages, then growth is at 0.24% and 7% per year over the past 5 and 10 years. Cash Flow per Share is down by 3.2% and up by 9% per year over the past 5 and 10 years.

The Return on Equity has been over 10% each year over the past 10 years. The ROE for 2013 is at 13% and the 5 year median is at 11.1%. The ROE on comprehensive income is at 19.5% for 2013, and the 5 year median ROE is at 10.5%.

I get a Liquidity Ratio for this stock at 1.58. However, as with all financial institutions, this is not an important debt ratio. The Debt Ratio is at 1.07 which is pretty close to the historical norm for this stock. However, the Leverage and Debt/Equity Ratios at 18.53 and 17.39 are very much higher than in the past.

Sound bit for Twitter and StockTwits is: stable insurance company. I still think that insurance companies will provide long term dividend and stock price growth. However, it is hard to say when dividends will again increase. See my spreadsheet at gwo.htm.

This is the first of two parts. The second part will be posted on Tuesday, September 30, 2014 and will be 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.

See my website for stocks followed and investment notes. Follow me on Twitter or StockTwits.