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.
When I was updating my spreadsheet, I noticed that my total return on this stock is rather low at just 7.04% per year over the 17 years I have had this stock. But if you hold stocks for the long term, companies will go through some tough times and Life Insurance companies have since 2008. However, I am in the stock market for dividends and of my total return I got 4.75% in dividends per year over these 17 years. I am fine with this.
I did know very low interest rates would harm Life Insurance companies. I also knew that things like very low interest rates would last a lot longer than everyone ever thinks they will.
The current dividend yield is good at 5.81%. The yield was in the moderate range prior to the 2008 bear market. The 5, 10 and historical yields are 4.73%, 4.80% and 3.43%. Prior to 2008, the dividend growth was moderate to good. However, dividend increases stopped in 2010 and did not resume until 2015.
The Dividend Payout Ratios are fine. The DPR for EPS for 2018 is 55% with 5 year coverage at 54%. The DPR for CFPS for 2018 is 16% with 5 year coverage at 16% also.
Debt Ratios are fine. Since this is a life insurance company you look at what assets and investments that they have to cover their long term obligations. For this company the Obligation/Asset Ratio is 0.90 and this is fine. (This means that obligations are 90% of assets, so this is good.) I get a Liquidity Ratio of 2.16, but this is not an important ratio for a life insurance company. The Debt Ratio is 1.08 and for Life Insurance companies, like banks any ratio about 1.04 for fine.
The Total Return per year is shown below for years of 5 to 27 to the end of 2018. 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.
I bought this stock at various times between 2001 and 2011. My total return is 7.04% per year with 4.75% per year from Dividends and capital gains of 2.29% per year. I am a long term investor and I plan to hold on to this stock. I expect that in the future that capital gains portion will go high and dividend portion will moderate.
| From | Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|---|
| 2013 | 5 | 4.10% | -1.31% | -6.26% | 4.94% |
| 2008 | 10 | 2.53% | 6.70% | 0.78% | 5.92% |
| 2003 | 15 | 7.21% | 5.32% | 0.28% | 5.04% |
| 1998 | 20 | 10.10% | 6.82% | 2.11% | 4.71% |
| 1993 | 25 | 12.03% | 14.13% | 7.49% | 6.64% |
| 1991 | 27 | 12.01% | 16.82% | 9.23% | 7.59% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 10.25, 11.22 and 12.19. The corresponding 10 year ratios are 10.31, 11.88 and 13.16. The corresponding historical ratios are 10.25, 12.00 ad 14.78. The current P/E Ratio is 8.84 based on a stock price of $31.38 and 2019 EPS estimate of $3.55. This stock price testing suggests that the stock price is relatively cheap.
I get a Graham Price of $45.80. The 10 year low, median, and high median Price/Graham Price Ratios are 0.81, 0.92 and 1.02. The current P/GP Ratio is 0.69 based on a stock price of $37.38. 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 1.54. The current/B Ratio is 1.2 based on Book Value of $18,750, Book Value per Share of $24.26 and a stock price of $31.38. The current P/B Ratio is some 22% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
I get an historical median dividend yield of 3.43%. The current dividend yield is 5.81% based on dividends of $1.82 and a stock price of $31.38. The current yield is 69% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively cheap.
The 10 year median Price/Sales (Revenue) Ratio is 0.58. The current P/S Ratio is 0.50 based on 2018 Revenue estimate of $45,261M, Revenue per Share of $63.38 and a stock price of $31.38. The current ratio is 15% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
Results of stock price testing is mostly coming up cheap. Although you cannot ignore the P/S Ratio test which says it is close the cheap, but not quite there. This is a conglomerate, and they usually are priced at a discount, however, my testing takes that into account.
When I look at analysts’ recommendations, I find Buy (2) and Hold (5). The consensus would be a Hold. The 12 month stock price is $34.43. this implies a total return of $15.53% with 9.72% from capital gains and 5.81% from dividends.
See what analysts are saying on Stock Chase. Some analysts like this stock and one says he prefers Sun Life. Andrew Walker on Motley Fool likes this stock for its yield. The site of Market Beat has some interesting date on this stock. Nelson Smith on Motley Fool thinks the company is a value trap. A writerSimply Wall Street thinks this company is cheap. Norman Levine on BNN Bloomberg discusses this stock.
Power Financial, a subsidiary of Power Corporation of Canada, is a diversified management and holding company with interests in the financial-services industry through its controlling interests in Great-West Lifeco and IGM Financial. It also has holdings in Pargesa, a diversified industrial group based in Europe. Its web site is here Power Financial Corp.
The last stock I wrote about was about was TFI International (TSX-TFII, OTC-TFIFF) ... learn more. The next stock I will write about will be Ag Growth International (TSX-AFN, OTC-AGGZF) ... learn more on Friday, May 10, 2019 around 5 pm. Tomorrow on my other blog I will write Something to Buy May 2019.... learn more on Thursday, May 09, 2019 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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