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 the estimates of last year were missed, so new estimate are lower. For example, last year the estimates for EPS were $2.65, $3.12, and $3.39 for the next 3 years of 2019, 2020 and 2021. However, EPS for 2019 came in at $2.49 for 2019 rather than $2.65. The estimates were lowered for the next three years of 2020, 2021 and 2022 to $2.63, $3.04, and $3.33. So, the estimate for 2020 went from $3.12 to $2.63 and for 2021 went from $3.39 to $3.04.
When I set up this spreadsheet, I looked at the yield on the original purchase price if the stock was bought with the low or high price after 5 and 15 years. So, if you paid the highest price 5 years ago, the yield today would be 4.67%, but if you bought it using the lowest price 5 years ago, your yield today would be 5.60% on your original purchase price. If we looked at a 15 year period, if you paid the highest price 15 years ago, your yield would be 5.73%, but if you paid the lowest price 15 years ago your yield today would be 6.54% on your original purchase price.
The dividend yields are currently good with dividend growth low. The current dividend yield at 6.71% is good (5% and 6% ranges). The 5, 10, and historical dividend yields are in the moderate range (2% to 4%) at 4.13%, 4.46% and 3.56%. The current dividend growth is low (under 8%) at 6.08% per year over the past 5 years. The last dividend increase was for 6.1% and it was in 2020.
The Dividend Payout Ratios (DPR) are good. The DPR for EPS for 2019 was 66% with 5 year coverage at 56%. The DPR for CFPS for 2019 was 25% with 5 year coverage at 23%. The DPR for Free Cash Flow for 2019 was 26% with 5 year coverage at 23%. Dividend Coverage Ratio for 2019 was 3.92 with the 5 year ratio at 4.26.
Debt Ratios could improve. This is a financial, so I am looking at Debt/Investment Ratio. For 2019 and currently, it is 1.03. This should not be higher at 1.00. Until this year it was lower, but it has been getting higher lately. I calculate the Liquidity Ratio for 2019 to be 1.26, but this is not an important ratio for a Financial stock. The Debt Ratio is 1.06 and this is fine for a financial and it has a 5 year median of 1.07. The Leverage and Debt/Equity Ratios for 2019 is 17.66 and 16.66, respectively. The 5 year ratios are 15.91 and 14.91.
The Total Return per year is shown below for years of 5 to 31 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 | 6.08% | 4.18% | -0.20% | 4.38% |
| 2009 | 10 | 2.99% | 6.68% | 2.15% | 4.53% |
| 2004 | 15 | 6.04% | 5.66% | 1.52% | 4.14% |
| 1999 | 20 | 9.58% | 10.85% | 5.67% | 5.17% |
| 1994 | 25 | 11.87% | 18.08% | 10.45% | 7.63% |
| 1989 | 30 | 11.53% | 15.28% | 9.59% | 5.69% |
| 1988 | 31 | 11.14% | 16.83% | 10.51% | 6.31% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 11.31, 12.43 and 13.72. The corresponding 10 year ratios are 11.19, 12.41 and 13.64. The corresponding historical ratios are 11.19, 12.48 and 18.83. The current P/E Ratio is 9.93 based on a stock price of $26.12 and EPS estimate for 2020 of $2.63. This stock price testing suggests that the stock price is relatively cheap.
I get a Graham Price of $36.07. The 10 year low, median, and high median Price/Graham Price Ratios are 0.87, 0.98 and 1.08. The current P/GP Ratio is 0.72 based on a stock price of $26.12. 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 1.75. The current P/B Ratio is 1.19 based on a stock price of $26.12, a Book Value of $20,393M and a Book Value per Share of $21.98. The current P/B Ratio is 32% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
I get a 10 year median Price/Cash Flow per Share Ratio of 4.98. The current P/CF Ratio is 4.07 based on the last 12 months Cash Flow of $5,950M, Cash Flow per share of $6.41 and a stock price of $26.12. The current ratio is 18% 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 3.56%. The current dividend yield is 6.71% based on dividends of $1.75 and a stock price of $26.12. The current yield is 88% above the historical dividend yield. This stock price testing suggests that the stock price is relatively cheap.
I get a 10 year median dividend yield of 4.46%. The current dividend yield is 6.71% based on dividends of $1.75 and a stock price of $26.12. The current yield is50% above the historical dividend 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 0.50 based on Revenue estimate for 2020 of $48, 082M, Revenue per Share of $51.83 and a stock price of $26.12. The current ratio is 33% below the 10 year median 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. Both the dividend yield tests show this as does the P/S Ratio testing. The only test that says something different is the P/CF Test and it says that the stock price is reasonable and below the median. However, this one of my least favourite tests, so I will go with cheap.
Is it a good company at a reasonable price? This is a dividend growth stock which are the type I like. I have 31 years of dividend data and they have increased the dividends 21 of those years and there were no years when the dividends were decreased. Dividend growth is low, but Life Insurance companies have had it rough with the very low interest rates.
When I look at analysts’ recommendations, I find Strong Buy (1), Buy (2) and Hold (7). The consensus would be a Buy. The 12 month stock price consensus is $29.00. This implies a total return of 17.73% with 6.71% from dividends and 11.03% from capital gains.
The last entries on Stock Chase say Life Insurance companies are cheap, but it might be wise to wait a bit before buying. Christopher Liew on Motley Fool says buy and hold this company for the long term to build wealth. The executive overview on Simply Wall Street has no negatives. A writer on Simply Wall Street is concerned about falling EPS, but if you look at 5 year running averages, the EPS has grown at the rate of 4.3% per year. This is comparing EPS for the 5 years prior to 2014 and the 5 years prior to 2019. The Blogger Dividend Earner reviewed this stock in May 2020.
Great-West Lifeco is one of the three big Canadian life insurance firms. With just under half of the firm's profit and revenue in Canada, Great-West also operates in the U.S. and Europe. In Canada, Great-West provides both individual and group insurance. In the United States, Great-West operates Putnam Investments and defined contribution (DC) record-keeping firm Empower Retirement. In Europe, Great-West offers life insurance, annuities, and reinsurance primarily in the U.K., Ireland, and Germany. 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 Wednesday, September 23, 2020 around 5 pm. Tomorrow on my other blog I will write about Dividends, Bear Markets.... learn more on Tuesday, September 22, 2020 around 5 pm.
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