I own this stock of Power Corp of Canada (TSX-POW, OTC-PWCDF). I started following this stock because it was on the Dividend Achievers, the Dividend Aristocrats lists and also on Mike Higgs’ list. It is a stock that I notice has been recommended lately as good value (October 2008). I got shares in this company when Power Corp reorganized and gave out Power Corp Shares to replace Power Financial Shares.
When I was updating my spreadsheet, I noticed that the company bought back a lot of shares (8.5%). I have not done well with this lately. I was one of the shareholders who had to trade in the Power Financial Corp shares for Power Corp Shares. It is up by 7.6% from last month. Out of the 157 stock I track, this is position 50 in change from last month, going from lowest change to highest change in stock price. Insiders stated to buy when the stock hit around $22.00.
The dividend yields have been moderate with dividend growth low. Mostly dividends on this stock has been in the moderate (2% to 4% ranges). However, the most recent yields are in the good range (5% to 6% ranges) with the current dividend yield in a high range (over 6%) at 8.28%. The 5, 10 and historical dividend yields are moderate at 4.56%, 4.56% and 2.34%. Yields have been higher since 2008 because insurance companies have not done well since then because of low interest rates. The dividend growth is currently low (under8%). See chart below.
The Dividend Payout Ratios (DPR) are good. The DPR for EPS for 2019 is 63% with 5 year coverage at 50%. The DPR for CFPS for 2019 is 10% with 5 year coverage at 9%. The DPR for Free Cash Flow for 2019 is 10.5% with 5 year coverage at 9.7%.
Debt Ratios are fine, but debt and covering asset ratio could be improved. Since this is a financial, I am looking at long term debt compared to covering assets and the ratio is high at 0.99. The Liquidity Ratio, which is of much importance, is good at 2.03. The Debt Ratio is 1.08 which is normal for a Financial Services sector stock. Leverage and Debt/Equity Ratio at 13.04 and 12.04 are rather normal for a Financial Services sector stock.
The Total Return per year is shown below for years of 5 to 32 to the end of 2019. 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. |
|---|---|---|---|---|---|
| 2014 | 5 | 5.47% | 5.37% | 1.04% | 4.32% |
| 2009 | 10 | 3.25% | 5.46% | 1.36% | 4.09% |
| 2004 | 15 | 7.32% | 4.02% | 0.51% | 3.52% |
| 1999 | 20 | 9.85% | 9.47% | 5.10% | 4.37% |
| 1994 | 25 | 10.91% | 13.59% | 8.27% | 5.32% |
| 1989 | 30 | 10.73% | 11.51% | 7.39% | 4.12% |
| 1987 | 32 | 10.03% | 11.12% | 7.25% | 3.87% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 9.67, 11.22 and 12.05. The corresponding 10 year ratios are 10.32, 11.43 and 13.02. The corresponding historical ratios are 10.82, 12.63 and 14.21. The current P/E Ratio is 15.33 based on a stock price of $21.62 and 2020 EPS estimate of $1.41. This stock price testing suggests that the stock price is relatively expensive.
Looking further into the P/E Ratios, I realize that the P/E Ratio for 2020 is high because EPS is expected to drop by 44% this year before going back to a more normal value in 2021. The potential P/E Ratio for 2021 is 7.48 based on a stock price of $21.62 and 2021 EPS Estimate of $2.89. This stock price testing suggests that the stock price is relatively cheap.
I get a Graham Price of $32.65. The 10 year low, median, and high median Price/Graham Price Ratios are 0.72, 0.78 and 0.84. The current P/GPR Ratio is 0.66 based on a stock price of $21.62. 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 1.17. The current P/B Ratio is 0.64 based on a stock price of $21.62, a Book Value of $14,334M and a Book Value per Share of $33.61. The current P/B ratio is 45% below the 10 year median P/B Ratio. This stock price testing suggests that the stock price is relatively cheap.
Looking further in the P/B Ratio I see that the current ratio is 0.64 and therefore below 1.00 which means the stock is selling below the book value (or potential breakup value). A P/B Ratio this low is either a sign of a cheap stock or a stock in trouble.
I get an historical median dividend yield of 2.34%. The current dividend yield is 8.28% based on dividends of $1.75 and a stock price of $21.62. The current dividend is 254% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively cheap.
I get a 10 year median dividend yield of 4.56%. The current dividend yield is 8.28% based on dividends of $1.75 and a stock price of $21.62. The current dividend is 82% 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 0.34. The current P/S Ratio is 0.20 based on 2020 Revenue estimate of $46,990M, Revenue per Share of $110.18 and a stock price of $21.62. The current ratio is 42% below the 10 year ratio. This stock price testing suggests that the stock price is relatively cheap.
Results of stock price testing is that the stock price is relatively cheap. This cannot be a surprise as a lot of stocks are cheap due to the current bear market. The dividend yield tests show this and the cheapness is confirmed by the P/S Ratio test. The only test not to show this is the P/E Test, but this is due to an expected drop in the EPS this year. There are no problems with the other tests which show this stock is cheap.
Is it a good company at a reasonable price? This stock is back on the Canadian Dividend Aristocrat list, but this list does not have very high standards. I think it is a good long term dividend growth stock to hold and I will continue to hold it. It is current selling at a cheap price.
When I look at analysts’ recommendations, I find Strong Buy, (1), Buy (1) and Hold (6). The consensus is a Hold. The 12 month stock price consensus is $26.13. This implies a total return of 29.14% with 20.86% from capital gains and 8.28% from dividends.
See what analysts are saying on Stock Chase. One says the stock is stable and safe. Aditya Raghunath on Motley Fool says this company is a great buy now. A Writer on Simply Wall Street says this stock is trading beneath its intrinsic value. Andrew Willis speaks on Morningstar talks about this stock. David Scanlan on Financial Post talks about changes at the top of Power Corp.
Incorporated in 1925, Power Corp. of Canada is a diversified holding company with interests in financial services, communications, and other business sectors. Its web site is here Power Corp of Canada.
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 Wednesday, May 6, 2020 around 5 pm. Tomorrow on my other blog I will write about Something to Buy May 2020.... learn more on Thursday, May 09, 2020 around 5 pm.
Also, on my book blog I have put a review of the book Bush Runner by Mark Bourrie learn more...
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