Monday, May 25, 2015

Power Financial Corp.

On my other blog I am today writing revising my web site to make it smartphone compatible continue...

Sound bite for Twitter and StockTwits is: Back to Dividend Growth Stock. I stuck it out with insurance companies during their recent bad times as I expected to eventually be rewarded. Several insurance companies have again started to grow their dividends. I expect that the growth will be low as long as interest rates are low. See my spreadsheet at pwf.htm.

I own this stock of Power Financial Corp. (TSX-PWF, OTC- POFNF). When I sold some bonds in 2001, 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.

As with other insurance companies, this company stopped increasing their dividends in 2009. Dividends were flat from 2009 to 2014 inclusive. In 2015 dividends were finally raised again and the increase was for 6.4%. The dividend growth is 0% and 6.7% per year over the past 5 and 10 years. The current dividend yield is quite good at the moment at 4.03%. The 5 year median is higher at 4.6%.

Dividend Payout Ratios are good with the 2014 DPR for EPS at 46.7% and for CFPS at 14.7%. The 5 year median values are for EPS at 58.15 and 16.4%.

The historical median dividend yield is much lower at 3% than the 5 year median dividend yield. If you use the median dividend yield to 2008 it is even lower at 2.8%. Also, the 10 year growth in dividends to 2008 was much higher than the current one at 18.2% per year. The thing is times will not always be tough for insurance companies, and if you are buying them now, you should also look to see what the characteristics of them were prior to 2008.

I bought stock in this company in 2001, 2004 and 2011. My total return is 8.83% per year with 4.75% from capital gains and 4.08% from dividends. I have received some $11.91 per share in dividends and my cost basis per share is 23.23. That means that dividends have covered some 51.35 of my share costs. On the shares I bought in 2001, my dividend yield on my original cost is 7.8%.

The recent total returns have not been that great as this stock, like other insurance companies, took a big hit in 2008. The 5 and 10 years total returns on this stock have been 8.05% and 4.81% per year. The portion of this return attributable to capital gains is at 3.77% and 1.02% per year. The portion of this return attributable to dividends is at 4.28% and 3.79% per year.

The number of outstanding shares has changed over the past 5 and 10 years, increasing only at 0.2% and 0.1%. The shares have increased due to Stock options mostly, but also for Employees Stock Participation Plan. Revenue growth has been moderate over the past 5 and 10 years. EPS growth has been moderate to good over the past 5 and 10 years and Cash Flow growth has been low to moderate over the past 5 and 10 years.

Revenue is up by 5% and 5.7% per year over the past 5 and 10 years. Revenue per Share is up by 4.8% and 5.6% per year over the past 5 and 10 years. Last year, 2014, was a good year for revenue for this company with Revenue up 44%. This year is expected to be good year for Revenue growth also.

EPS growth is up by 9.5% and 3.6% per year over the past 5 and 10 years. Growth in EPS has been good over the past 3 years and is expected to be moderate for this year.

Cash Flow is up by 2% and 5.8% per year over the past 5 and 10 years. CFPS is up by 1.8% and 5.7% per year over the past 5 and 10 years. The problem is 2011 which saw a big drop in cash flow. However, Cash Flow has been growing since then.

The Return on Equity was over 10% until 2008 and has been lower than 10% since then. The ROE for 2014 was just 7.4% and it has a 5 year median of 7.1%. The comprehensive income has varied over time from the ROE on Net Income. The ROE on comprehensive income in 2014 was 7.3% and this has a 5 year median of 7.3%.

The Liquidity Ratio is very good in 2014 and it has generally been very good. The Liquidity Ratio for 2014 is 2.08 and it has a 5 year median of 2.08. As with other financials, the Debt Ratio tends to be rather low and the Leverage and Debt/Equity Ratios tend to be rather high. The Debt Ratio for 2014 is 1.08 and the 5 year median is 1.10. The Leverage and Debt/Equity Ratios for 2014 are 12.93 and 11.93, respectively. The 5 year median values are 11.05 and 9.90.

This is the first of two parts. The second part will be posted on Tuesday, May 26, 2015 and will be 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.

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

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