Wednesday, April 26, 2017

Power Financial Corp

Sound bite for Twitter and StockTwits is: Dividend Growth stock. Stock price is relatively cheap to relatively reasonable. However, Life Insurance companies are having a rough time with the current very low interest rates. If you buy Life Insurance companies you need to take this into consideration. See my spreadsheet on Power Financial Corp.

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.

This is a life insurance company so I have just done ok with it. I expect to do better long term. I have had this stock for 15 years and have earned 7.91% per year with 3.50% from capital gains and 4.41% from dividends. On the other hand the dividends have paid for 64% of the cost of my stock. I am earning a dividend yield of 8.7% on my original stock price. Life Insurance companies have had a hard time dealing with low interest rates and they are just starting to do better.

This stock used to have moderate dividend yields and good dividend increases. Dividend yields used to be in the 2% range and the increases were generally above 15%. However, there were no increases in dividends between 2010 and 2015. Now dividends are good and the dividend increases are low.

The current dividend yield is 4.81% and the dividend growth over the past 5 and 10 years is at 2% and 4.5%. Why it is so low is because no dividend increases were given between 2010 and 2015. The last dividend increase occurred in 2017 and it was for 5.1%. I do not see the low interest rates changing much or soon. So I see dividend yield and dividend increases changing much or soon either.

The 5 year low, median and high median Price/Earnings per Share Ratios are 10.38, 11.87 and 12.95. The corresponding 10 year values are 10.48, 12.00 and 13.55. The historical ones are 10.25, 12 and 14.78. These are pretty consistent. The current P/E Ratio is 10.52. This stock price testing suggests that the stock price is relatively on the cheap side.

I get a Graham Price of $41.69. The 10 year low, median and high median Price/Graham Price Ratios are 0.82, 0.93 and 1.08. The current P/GP Ratio is 0.82 based on a stock price of $34.29. This stock price testing suggests that the stock price is relatively reasonable and below the median and almost cheap.

The 10 year Price/Book Value per Share Ratio is 1.68. The current P/B Ratio is 1.45 based on a stock price of $34.29 and BVPS of $23.70 based on year end outstanding shares. The current P/B Ratio is some 14% lower than the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.

The current dividend yield is 4.81% based on dividends of $1.65 and a stock price of $34.29. The historical median dividend yield is 3.38% a values some 42% lower. This stock price testing suggests that the stock price is relatively cheap. This is because the current dividend yield is more than 20% lower than the historical median dividend yield. However the current dividend yield is not up to the historical high which is 6.05%.

When I look at analysts' recommendations, I find Buy and Hold recommendations. Most of the recommendations are a Hold and the consensus recommendation would be a Hold. The 12 months stock price consensus is $37.43. This implies a total return of $13.97% with 4.81% from dividends and 9.16% from capital gains.

Doug Wharley on The Cerbat Gem talks about Scotiabank confirming their target price of $38.00 for this stock. Lauren Steadman on Transcript Daily says that Royal Bank Analysts have cut their target price from $36.00 to $35.00. Will Ashworth at Motley Fool talks about Power Financial investing in Wealthsimple and how this was a great idea. See what analysts are saying about this company on Stock Chase.

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 Corp.

The last stock I wrote about was about was Fortis Inc. (TSX-FTS, OTC-FRTSF)... learn more . The next stock I will write about will be WSP Global Inc. (TSX-WSP, OTC- WSPOF)... learn more on Friday, April 28, 2017 around 5 pm. Tomorrow on my other blog I will write about The Other Side blog... learn more on Thursday, April 27, 2017 around 5 pm.

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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