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).
When I was updating my spreadsheet, I noticed that this company did get hit hard by the last recession. Most insurance companies did. There were no dividend increases for 5 years from 210 to 2014 inclusive.
This stock had lower yields until the 2008 bear and then they went from low (1% and lower) and moderate (2 and 3%) to good (4% and higher). The current dividend yield is 4.92%, with 5, 10 and historical dividend yields at 4.06%, 4.33% and 3.37%. Dividend growth is low at the present time with the 5 and 10 year growth at 3.60% and 3.31%. Pass growth was higher, see chart below. The last dividend increase was in 2018 and it was for 6%.
The Dividend Payout Ratio for EPS for 2017 was at 68% with 5 year coverage at 53%. The DPR for CFPS for 2017 was at 42% with 5 year coverage at 42%. The coverage for EPS is fine, but I would prefer the coverage for CFPS to be 40% or less.
Life Insurance companies generally have lots of debt because of their contracts. So, for them, the Long Term Debt/Market Cap is not the measure you want. You want the Long Term Debt to be covered by cash and investments. For this company the Debt/Investment Ratio is 0.95.
The Total Return per year is show below for years of 5 to 23. Under the Capital Gain column is the portion of the Total Return attributable to capital gains. Under the Dividend column is the portion of the Total Return attributable to dividends. See charts below.
Except for 10 year returns, shareholders have done well. Make sure that you are not overpaying when buying stocks because if you do it can affect your long term results. 10 years ago, the stock hit a high. It was probably not a good time to buy.
| Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|
| 5 | 3.60% | 12.29% | 7.59% | 4.70% |
| 10 | 3.31% | 3.45% | -0.13% | 3.58% |
| 15 | 7.85% | 8.35% | 4.09% | 4.26% |
| 20 | 10.91% | 11.19% | 6.68% | 4.50% |
| 23 | 12.39% | 18.67% | 11.67% | 7.00% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 11.37, 12.53 and 13.91. the corresponding 10 year corresponding ratios are 11.34, 12.48 and 14.21. The historical ratios are 12.27, 13.47 and 15.32. The current P/E Ratio is 10.30 based on a current stock price of $31.61 and 2018 EPS estimate of $3.07. This stock price testing suggests that the stock price is relatively cheap.
I get a Graham Price of $39.29. The 10 year low, median, and high median Price/Graham Price Ratios are 0.89. 1.00 and 1.16. The current P/GP Ratio is 0.83 based on a stock price of $31.61. This stock price testing suggests that the stock price is relatively cheap.
I get a 10 year median Price/Book Value per Share Ratio of 1.82. The current P/B Ratio is 1.49 based on a Book Value of $20,989M, Book Value per Share of $21.22 and a stock price of $31.61. The current P/B Ratio is some 18% below the 10 year median. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get an historical median dividend yield of 3.37%. The current Dividend yield is 4.92% based on dividends of $1.556 and a stock price of $31.61. The current dividend yield is some 46% above the historical yield. This stock price testing suggests that the stock price is relatively cheap.
The 10 year median Price/Sales (Revenue) Ratio is 0.75. The current P/S Ratio is 0.66 based on 2018 Revenue estimate of $47,705M, Revenue per Share of $48.24 and a stock price of $31.61. The current ratio is some 13% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I see no reason to say that any of these tests are invalid. So, it would seem that the stock price is running from relatively cheap to relatively reasonable and below the median. The P/B Ratio test shows the price close to cheap as the stock price is considered cheap if the current ratio is 20% below the 10 year median ratio. This test shows the stock price close to cheap. So, 3 of 5 test show stock is cheap and one shows it nearly cheap. Certainly, the stock is selling at a good price.
When I look at analysts’ recommendations I find Strong Buy (1), Buy (1) and Hold (8). The consensus would be a Hold. The 12 month stock price consensus is $36.40. This implies a total return of 20.08% with 15.15% from capital gains and 4.92% from dividends based on a current price of $31.61.
David French and John Tilak on Reuters talk about this company selling off some Life Insurance contracts. Hector Vargas on Simply Wall Street talks about ownership and seems to have missed the ownership by Power Corp. Maria Luz-Campos on X News Press talks about recent analyst’s reports. Jason Phillips on Motley Fool talks about Yield Curve and Insurance Companies. See what analysts are saying about this company on Stock Chase. Some are no keen on this company.
Great-West Lifeco Inc is a life insurance company that also offers health insurance, retirement and investment services, asset management and reinsurance businesses. It operates in Canada, U.S. and Europe. Its web site is here Great-West Lifeco Inc..
The last stock I wrote about was about was Trican Well Service Ltd (TSX-TCW, OTC-TOLWF) ... learn more. The next stock I will write about will be Gluskin Sheff + Associates Inc. (TSX-GS, OTC-GLUSF) ... learn more on Friday, September 28, 2018 around 5 pm. Tomorrow on my other blog I will write about Money Show 2018 – Steven Hawkins.... learn more on Thursday, September 26, 2018 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.
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