Is it a good company at a reasonable price? The stock price seems reasonable. However, if we are in a bear market, you would want all stock price testing to point to a cheap price. A cheap price would be something close to $26.00. I plan to hold on to the shares I have in this company. I will not buy more because I have enough invested in this stock. It is just over 3% of my portfolio.
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 my returns have been mediocre for this stock I have had for some 20 years. I started with Power Financial, and had to convert to Power Corp in 2020 when the company was re-organized. My total return for PWF and POW is 7.80% per year. My RRSP account did better at 8.64% in Total Return and my Trading account did worse at 6.03% Total Return. Original purchase does count. However, this company hold a number of Life Insurance companies and these companies have had a hard time because of ultra-low interest rates. They will be do better with more normal interest rates.
If you had invested in this company in December 2011, $1000.44 you would have bought 42 shares at $23.82 per share. In December 2021, after 10 years you would have received $590.92 in dividends. The stock would be worth $1,755.60. Your total return would have been $2,346.52.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $23.82 | $1,000.44 | 42 | 10 | $590.92 | $1,755.60 | $2,346.52 |
The dividend yields are good with dividend growth low. The current dividend is good (5% to 6% ranges) at 5.67%. The 5 year median dividend yield is also good at 5.36%. The 10 and historical dividend yields are also moderate (2% to 4%) at 4.37% and 2.39%. The dividend is growing at a low rate (under 8% per year) at 4.9% per year over the past 5 years. The last dividend increase occurred in 2022 and was for 10.6% after no increase in 2021.
The Dividend Payout Ratios (DPR) are good. The DPR for EPS for 2021 is 42% with 5 year coverage at 52%. The DPR for Adjusted Earnings per Share (AEPS) for 2021 is 38% with 5 year coverage at 48%. The DPR for Cash Flow per Share for 2021 is 10% with 5 year coverage also at 10%. The DPR for Free Cash Flow is 10% with 5 year coverage also at 10%.
Debt Ratios are fine. Because this is a financial, I look at the Debt/Asset Coverage Ratio and for 2021 it is fine at 0.95. Although the Liquidity Ratio is not important for financial, I calculate it to be 2.74 for 2021. The Debt Ratio for 2021 is 1.07 and this is fine for a financial.
The Total Return per year is shown below for years of 5 to 34 to the end of 2021. 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. |
|---|---|---|---|---|---|
| 2016 | 5 | 4.88% | 11.50% | 6.82% | 4.68% |
| 2011 | 10 | 4.43% | 10.32% | 5.78% | 4.53% |
| 2006 | 15 | 5.87% | 4.47% | 1.14% | 3.34% |
| 2001 | 20 | 8.70% | 7.58% | 3.89% | 3.69% |
| 1996 | 25 | 10.01% | 12.25% | 7.49% | 4.76% |
| 1991 | 30 | 10.58% | 13.01% | 8.37% | 4.64% |
| 1987 | 34 | 9.78% | 11.28% | 7.51% | 3.76% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 8.54, 10.17 and 11.80. The corresponding 10 year ratios are 9.97, 11.15 and 11.98. The corresponding historical ratios are 10.55, 12.34 and 13.79. The current P/E Ratio is 9.97 based on a stock price of $34.89 and EPS estimate for 2022 of $3.50. The current is equal to the low of the 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable and below the median. This is close to cheap.
I get a Graham Price of $52.17. The 10 year low, median, and high median Price/Graham Price Ratios are 0.63, 0.71 and 0.80. The current P/GP Ratio is 0.67 based on a stock price of $34.89. The current ratio is between the low and median of the 10 year median ratio. 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 1.06. The current P/B Ratio is 1.01 based on a stock price of $34.89, Book Value of $23,385M and Book Value per Share of $34.56. The current ratio is 5% below the 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable and below the median.
There is also a Book Value per Share for 2022. That P/B ratio would be 0.94 based on a Book Value per Share estimate of $37.00, Book Value of 25,034M and a stock price of $34.89. This ratio is 11% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a 10 year median Price/Cash Flow per Share Ratio of 2.13. The current ratio is 2.14 based on last 12 months Cash Flow per Share of $16.34, Cash Flow of $11,053M and a stock price of $34.89. The current ratio is 0.4% above the 10 year ratio. This stock price testing suggests that the stock price is relatively reasonable but at the median.
I get an historical median dividend yield of 2.39%. The current dividend yield is 5.67% based on a stock price of $34.89 and a Dividends of $1.98. The current dividend yield is 137% 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 4.63%. The current dividend yield is 5.67% based on a stock price of $34.89 and a Dividends of $1.98. The current dividend yield is 23% 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 0.33. The current ratio is 0.33 based Revenue estimate for 2022 of $70,178M, Revenue per Share of $104.15 and a stock price of $34.89. The current P/S Ratio is the same as 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 that the stock price is stock price is probably reasonable. The dividend yield tests say it is cheap, but the P/S Ratio test is saying it is reasonable. The other tests vary from cheap to reasonable. If we are again in a bear market, I would not buy until all the tests are pointing to a cheap price.
When I look at analysts’ recommendations, I find Buy (3) and Hold (6). The consensus would be a Hold. The 12 month stock price consensus is $43.17. This implies a total return of 29.41% with 23.73% from capital gains and 5.67% from dividends.
Some analyst on Stock Chase say buy and others say hold. Stock Chase gives this stock 5 stars out of 5. Andrew Walker on Motley Fool thinks this stock is now oversold. Kay Ng on Motley Fool likes the 5% plus dividend yield. The company has put out a Press Release on its 2021 results. The company has put out a press release on Newswire for its first quarter results of 2022. Simply Wall Street on Yahoo Finance talks about who owns stock in this company. Simply Wall Street has one warning of earnings are forecast to decline by an average of 4.5% per year for the next 3 years. Analyst expect EPS to drop 18% next year, but this is after an 39% rise in 2021.
Power Corp. of Canada is a diversified holding company with interests in financial services, communications, and other business sectors through its controlling interests in Power Financial. Power Financial in turn holds controlling interests in Great-West Life (an insurance conglomerate), IGM Financial (Canada's largest nonbank asset manager), and Pargesa (a holding company with interests in European companies). Its web site is here Power Corp of Canada.
The last stock I wrote about was about was McCoy Global Inc (TSX-MCB, OTC-MCCRF) ... learn more. The next stock I will write about will be Ag Growth International (TSX-AFN, OTC-AGGZF) ... learn more on Monday, May 16, 2022 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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