Power Corp of Canada

Sound bite for Twitter and StockTwits is: Buy good company cheap. If you have a long term horizon and are putting together a dividend growth portfolio, this would be a good stock to have. There is little risk and the recovery may not be quick, but it will recover and provide future dividend growth and stock price growth. The right time to buy good companies is when they are cheap. See my spreadsheet on 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. It is a stock that I notice has been recommended lately as good value (October 2008). I believe it is still a dividend growth stock. I would not buy it just because I have shares in Power Financial, which this company controls. It would not really be prudent to have both.

The negative that I see with Power Corp is that its set up is that it is complicated. They have a lot of companies and they most also trade on the TSX. The Desmarais family retains control by having special shares that have 10 votes each. A positive is that they allow shareholders to profit from investing in their companies.

From 1993 to 2008, the median dividend increase was just over 17% per year. At that time, the dividend yield was a lot lower, closer to 2% than the 4.5% of today. A lot of companies involved in insurance had difficulties since 2008 and this company is no different. There were no dividend increases from 2009 to 2014 inclusive. The dividend increases in 2015 and 2016 were for just over 7% with the one for 2016 being at 7.6%.

The company can afford their dividends. The Dividend Payout Ratio for 2015 for EPS was 32%. The DPR for CFPS was 9%. They have always fairly good coverage of their dividends. Today I would consider the dividend to be very good with moderate growth. The current dividend is at 4.6% based on a stock price of $29.30 and dividends of $1.34. The recent growth is of dividends is just over 7%.

If dividends growth say at around 7.4% and if you bought the stock today at around $29.30, you could be earnings dividends of at 6.5%, 9.3% and 13.3% in 5, 10 and 15 years on your original investment. Using dividend growth stock to build a portfolio is taking advantage of compounding.

Lately this company has had good growth in EPS, low to moderate growth in Revenue and low to non-existent growth in Cash Flow. Revenue per Share has grown at 2.9% and 3.4% per year over the past 5 and 10 years. EPS has grown at 15.25 and 5.5% per year over the past 5 and 10 years. This is because there has been recent great growth in EPS. CFPS has declined by 1.1% and grown by 1% per year over the past 5 and 10 years. Analysts expect good growth in revenue, but a decline in EPS for 2016.

The 5 year low, median and high median Price/Earnings per Share Ratios are 10.26, 11.08 and 12.66. The corresponding 10 year ratios are a bit higher at 10.82, 13.00 and 14.37. The same can be said for the historical ratios at 10.96, 13.14 and 15.02. The current P/E Ratio is 9.80 based on a stock price of $29.30 and 2016 EPS estimate of $2.99. This stock price testing suggests that this stock is relatively cheap.

I get a Graham Price of $42.41. The 10 year low, median and high median Price/Graham Price Ratios are 0.78, 0.93 and 1.08. The current P/GP Ratio is 0.69 based on a stock price of $29.30. This stock price testing suggests that this stock is relatively cheap.

The 10 year Price/Book Value per Share 1.45. The current P/B Ratio is 1.10 based on a stock price of $29.30 and BVPS of $26.74. This current P/B Ratio is some 24% lower than the 10 year P/B Ratio. This stock price testing suggests that this stock is relatively cheap.

The historical dividend yield is 2.28%. The current dividend yield is 4.57% a values some 100% higher. The current dividend yield is based on dividends of $1.34 and a stock price of $29.30. This stock price testing suggests that this stock is relatively cheap.

When I look at analysts' recommendations I find Buy and Hold recommendations. The consensus recommendations would be a Hold as there are more Hold recommendations. The 12 month stock price is $33.36. This implies a total return 18.435 with 13.86% from capital gains and 4.57% from dividends.

In a recent article by Nasdaq, it says that Power Corp. of Canada has been named as a Top 25 dividend stock, according the most recent Canada Stock Channel's Dividend Rank report. This article in the G&M by David Milstead talk about some directors having shareholders withhold their votes because of lack of attendance at Board Meetings. This article by John Reese in the G&M says that this company is one of three solid stocks that should hold up in bad times. Sam Kovacs of Seeking Alpha does a good job of breaking down this company's structure.

I will have only one entry for this stock this year. However, I did a more complete report on this company in 2015 and you can see that report here and here.

Yesterday on my other blog I wrote about Something to Buy for June 2016... learn more . The next stock I will write about will be Canexus Corporation (TSX-CUS, OTC- CXUSF)... learn more on Monday, June 13, 2016 around 5 pm.

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 of Canada.

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. I have three blogs. The first talks only about specific stocks and is called Investment Talk . The second one contains information on mostly investing and is called Investing Economics Mostly. My last blog is for my book reviews and it is called Non-Fiction Mostly. Follow me on Twitter or StockTwits.