Friday, September 30, 2016

Great-West Lifeco Inc.

Sound bite for Twitter and StockTwits is: Good stock price. The stock price is relatively cheap to reasonable. Life Insurance companies are going to suffer under low interest rates. If you have time to wait, this might be a good stock to buy. This would be under the rule of buy good companies when they are cheap. You wait for better times, but in the meantime you collect dividends income. See my spreadsheet on Great-West Lifeco Inc.

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).

Dividends are moderate to good. The current dividend yield is 4.28%. The 5 year median is 4.28% and the historical median is 3.10%. As with a lot of insurance companies, this company stopped raising their dividends because of the 2008 crisis. They had flat dividends from 2009 to 2015. The last dividend raise was in 2016 and it was for 6.1%. The 5 and 10 years dividend growth is at 1.2% and 4.9% per year.

The 5 year low, median and high Price/Earnings per Share Ratios are 10.54, 12.34 and 13.30. The corresponding 10 year ratios are 11.34, 12.48 and 15.08. The historical ratios are 12.27, 13.47 and 15.32. I would image the P/E Ratios went down because of flat dividends from 2009 or 2015. The dividend increases are not as good as they used to be. The median dividend increase was 20% before 2009. The two increases since they restarted in 2015 were 6% and 6.1%. This may not get any better anytime soon while interest rates are so low.

The current P/E Ratio is 12.34 based on 2016 EPS estimate of $2.62 and a stock price of $32.33. On any grounds this P/R Ratio points to a stock price that is relatively reasonable and below the median. It may be a bit on the relatively cheap side.

I get a Graham Price of $33.46. The 10 year low, median and high median Price/Graham Price Ratios are 0.91, 1.02 and 1.21. The current P/GP Ratio is 0.97 based on a stock price of $32.33. This test suggests that the stock price is relatively reasonable and below the median.

I get a 10 year median Price/Book Value per Share Ratio of 1.87. The current P/B Ratio is 1.70 based on a stock price of $32.33 and a BVPS of $19.00. The current P/B Ratio is some 9% lower than the 10 year median ratio and this testing suggests that the stock price is relatively reasonable.

I get a current dividend yield of 4.28% based on a stock price of $32.33 and dividends of $1.38. The historical median dividend yield is 3.10% and this is some38% lower than the current dividend yield. The 5 year median dividend yield is 4.28% and the 10 year median dividend yield is 4.33%. The stock price has relatively been lower than historically because of the flat dividend rate from 2009 to 2015. Also life insurance companies are still, relatively, having a hard time with the low current interest rates. I do not think that anyone knows when we will get back to more normal rates.

This all suggests that the stock price is relatively low historically, but relatively reasonable and around the median more recently.

When I look at analysts' recommendations, I find mostly Hold recommendations and 1 sell recommendations. The 12 months stock price consensus is $33.91. This implies a total return of 9.17% with 4.28% from dividends and 4.89% from capital gains. Obviously lots of analysts' have not heard you should buy stocks when they are cheap. This is how you actually make money in the stock market. In fact, for good dividend stocks a reasonable return is 4% from dividends and 4% from capital gains.

This article on Market Watch talks about Great-West Life opening the TSX celebrating its 125th anniversary and 30 years on the stock exchange. Trent Williams on Community Financial News talks about recent analysts' recommendations which are mostly Hold recommendations. This article by Jonathan Ratner in the Financial Post talks about Brexit affecting this company as it gets some 40% of its revenue and 44% of its earnings from Europe. No one really knows how Brexit is going to work out. Nelson Smith of Motley Fool likes this company and feels investors should load up on Canadian Financials while their prices are low.

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.

The last stock I wrote about was about was Canyon Services Group (TSX-FRC, OTC-CYSVF)... learn more . The next stock I will write about will be Granite REIT (TSX-GRT.UN, NYSE-GRP.U)... learn more Monday, October 3, 2016 around 5 pm.

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 Lifeco Inc.

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.

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