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 as with all Life Insurance companies, this company has had a hard time because of ultra-low interest rates, but these companies are learning to deal with this. I noticed that the last two dividend increases are higher than the 5 year average of 4.8% with the increase in 2017 at 8.4% and the 2019 at 6.2%. Of course, the problem with the average for the past 5 years was the years with no dividend increases.
The current yield is good (5% or over) at 5.29%. The 5, 10 and historical yields are moderate (2 to 4% ranges) at 4.06%, 4.46% and 3.55%. Growth has been picking up as you can see from the chart below. This is because there was no growth from 2010 to 2014 inclusive. The last increase was in 2019 and it was for 6.2%.
The Dividend Payout Ratios are a bit high so there is some vulnerability here. The DPR for EPS for 2018 is 52% with 5 year coverage at 53%. The DPR for CFPS for 2018 is 44% with 5 year coverage at 42%. The DPR for EPS is expected to go a bit higher before dropping again.
Debt Ratios are fine, but there is some vulnerability here. Since this is a financial, you want to look at the assets covering the long term debt which for 2018 is at 0.94. The ratio for the second quarter of 2019 is 1.04 and this coverage ratio is not good as it should not be above 1.00. Over 1.00 means that they do not have enough cash and investments assets to covering their long term debt.
The Liquidity Ratio I calculate is 1.28. If you add in cash flow after dividends it is 1.93. This ratio is not an important one for financials. The Debt Ratio is 1.06 and this is fine for financials. Leverage and Debt/Equity Ratios at 15.61 ad 14.61 are probably a bit too high.
The Total Return per year is shown below for years of 5 to 30 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 chart below.
| From | Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|---|
| 2013 | 5 | 4.81% | 1.52% | -2.96% | 4.49% |
| 2008 | 10 | 2.63% | 8.64% | 3.13% | 5.51% |
| 2003 | 15 | 7.02% | 6.06% | 1.48% | 4.58% |
| 1998 | 20 | 10.28% | 8.61% | 3.94% | 4.67% |
| 1993 | 25 | 13.72% | 16.57% | 9.55% | 7.02% |
| 1988 | 30 | 11.31% | 16.75% | 10.27% | 6.48% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 11.37, 12.43 and 13.55. The corresponding 10 year ratios are 10.92, 12.39 and 13.73. The corresponding historical ratios are 11.31, 12.53 and 14.12. The current P/E Ratio is 11.78 based on a $31.23 and 2019 EPS estimate of $2.65. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a Graham Price of $35.25. The 10 year low, median, and high median Price/Graham Price Ratios are0.87, 0.98 and 1.11. The current P/GP ratio is 0.89 based on a stock price of $31.23. This stock price testing 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 1.75. The current P/B Ratio of 1.50 based on a stock price of $31.23, Book Value of $19,360M and Book Value per Share if $20.84. The current ratio is 14% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get an historical median dividend yield of 3.55%. The current dividend yield is 5.29% based on dividends of $1.652 and a stock price of $31.23. The current yield is 49% above the historical dividend yield. This stock price testing suggests that the stock price is cheap.
The 10 year median Price/Sales (Revenue) Ratio is 0.75. The current P/S Ratio is 0.50 based on 2019 Revenue estimate of $57,746M, Revenue per Share of $62.17 and a stock price of $31.23. The current P/S Ratio is 33% below the 10 year median ratio. This stock price testing suggests that the stock price is cheap.
Results of stock price testing is that the stock price is that the stock is probably relatively cheap. The P/S Ratio confirms the Dividend Yield test that the stock is relatively cheap. All the other tests point the stock as being relatively reasonable and below the median. The P/E Ratios for this stock is surprisingly consistent.
Is it a good company at a reasonable price? The stock price is cheap to reasonable. The company has a solid dividend payment record. I have records going back 30 years and they have paid dividends each year and have not decreased the dividends. This makes it a good dividend growth company. They kept the dividends flat for the years 2010 to 2014 inclusive. This is understandable because of the low interest rates.
When I look at analysts’ recommendations, I find Hold (10) and Underperform (1) recommendations. The consensus would be a Hold. The 12 month stock price consensus is $31.68. This implies a total return of 6.73% with 1.44% from capital gains and 5.29% from dividends based on a current price of $31.23.
Note that last year in September 2018 when I look at analysts’ recommendations, I found Strong Buy (1), Buy (1) and Hold (8). The consensus was a Hold. The 12 month stock price consensus was $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. It would appear that last year they were way off the 12 month consensus price. The price last year is almost the same as it is this year. Current Price is $31.23 and last year’s price was $31.61.
See what analysts are saying on Stock Chase. They mention that low interest rates are bad for insurance companies. Christopher Liew on Motley Fool likes the good dividends of this company for retirement income. A writer on Simply Wall Street thinks this stock is underpriced. A writer on Simply Wall Street talks about how badly the stock price has done over the past year. Mark Albertson on Silicon Angle talks about how the company is protecting itself against Malware. The CEO is interviewed on BNN Bloomberg.
Great-West Lifeco, majority-owned by Power Financial, is one of Canada's big three life insurance firms. Great-West primarily operates in its home market of Canada but has been expanding its operations in the U.S. and Europe through Irish Life, Putnam Investments, and now Empower Retirement. 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 Alcanna Inc (TSX-CLIQ, OTC-LQSIF) ... learn more on Monday, September 23, 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.
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. I am on Instagram. Or you can just Google #walktoronto spbrunner8166 to see my pictures.
No comments:
Post a Comment