Is it a good company at a reasonable price? The stock price is reasonable and it may even be cheap. I still like this company. It is a dividend growth company and it is the sort I like to invest in. It is a core stock for me and I expect that it will do better now that interest rates are going up. All Life Insurance companies had difficulties with the longtime of very low or negative interest rates.
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 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 I have not done well on this insurance company either. I started with Power Financial, but this was amalgamated with Power Corp, so now I have Power Corp. I have had it for 21 years and I have made 7.53% per year with 2.78% from capital gains and 4.75% from dividends. I bought at the wrong time. It has been done better lately, so I will keep my shares.
Power Corp did not have a good year in 2022. The problem was losses in their alternative investments. The interesting thing was that the people I follow in management and on the board increased their investment in this company. The exception was Paul and Andre Desmarais. But, the Desmarais family already have sizable investments in this company.
It is a large company and there was only insider buying, no selling in the past years with insider buying at 0.01% of the company’s market cap. You can see from the 2023 estimates that analysts expect Revenues etc. to recover this year. Insiders were buying at prices around $33.75 and $34.00.
The low capital gain has affected shareholders that have had this stock for years. See total return for the last 15 years, which is 2.2% with capital loss of 1.53% and dividends of 3.72%. What you expect from this stock, over the long term is about half your total return from Capital Gains and half from Dividends. The trouble with investing is the volatility. Personally, I am not selling because of a bad year in 2022.
The current dividend yield is good with dividend growth low. The current dividend yield is good (5% to 6% ranges) at 5.78%. The 5 year median dividend yield is good at 5.38%. The 10 year and historical median dividend yields are moderate (2% to 4% ranges) at 4.71% and 2.43%. The dividend growth is low (below 8%) at 7% per year over the past 5 years.
The Dividend Payout Ratios (DPR) are fine. The DPR for EPS for 2022 if 71% with 5 year coverage at 56%. The DPR for 2022 for Adjusted Earnings per Share (AEPS) is 69% with 5 year coverage at 54%. The DPR for Cash Flow per Share (CFPS) for 2022 is 16% with 5 year coverage at 11%. The DPR for 2022 for Free Cash Flow (FCF) for 2022 is 21% with 5 year coverage at 13%.
Debt Ratios are fine. This is a financial, so I am looking at Long Term Debt/Covering Assets Ratio and for 2022 is its 0.94 and good. The Liquidity Ratio for 2022 is 2.79 but it is not important for financials. The Debt Ratio is 1.06 and is fine for a financial.
|Liq. + CF||3.80|
The Total Return per year is shown below for years of 5 to 35 to the end of 2022. 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.|
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 10.70, 12.46 and 13.79. The current P/E Ratio is 9.01 based on a stock price of $36.32 and EPS estimate for 2023 of $4.03. The current ratio is below the low ratio of the 10 year median ratios. This stock price testing suggests that the stock price is relatively cheap.
I have Adjusted Earnings per Share (AEPS) data. The 5-year low, median, and high median Price/Adjusted Earnings per Share Ratios are 7.63, 9.08 and 11.54. The corresponding 10 year ratios are 8.45, 9.65 and 11.66. The current P/AEPS Ratio is 9.27 based on a stock price of $36.32 and AEPS estimate for 2023 of $3.92. The current ratio is between the low and median ratios of the 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a Graham Price of $55.48. The 10-year low, median, and high median Price/Graham Price Ratios are 0.60, 0.66 and 0.76. The current P/GP Ratio is 0.67 based on a stock price of $36.32. this ratio is between the median and high ratios of the 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get a 10-year median Price/Book Value per Share Ratio of 1.06. The current P/B Ratio is 1.08, based on a stock price of $36.32, Book Value of $22,452M and a Book Value per Share of $33.66. The current ratio is 2% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I also have a Book Value per Share of $37.90. This implies a ratio of 0.96 with a Book Value of $25,282M and a stock price of $36.32. The current ratio is 9% 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 2.17. The current P/CF Ratio is 3.23 based on Cash Flow per Share for the last 12 months of $11.25, Cash Flow of $7,502M and a stock price of $36.32. The current ratio is 49% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
I get an historical median dividend yield of 2.43%. The current dividend yield is 5.78% based on dividends of $2.10 and a stock price of $36.32. The current dividend yield is 168% 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 4.71%. The current dividend yield is 5.78% based on dividends of $2.10 and a stock price of $36.32. The current dividend yield is 23% above the 10 year 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 P/S Ratio is 0.34 based on Revenue estimate for 2023 of $71,376M, Revenue per Share of $107.00 and a stock price of$36.32. The current P/S ratio is 4% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median.
Results of stock price testing is that the stock price is reasonable and it may even be cheap. The dividend yield tests are saying the stock price is relatively cheap. The P/S Ratio is saying the stock price is reasonable. Most of the other testing is saying that the stock price is reasonable and above or below the median.
When I look at analysts’ recommendations, I find Hold (9) recommendations. The consensus would be a Hold. The 12 months stock price is $39.67. This implies a total return of 15.01% with 9.22% from capital gains and 5.78% from dividends.
Most analysts do like this company on Stock Chase. Stock Chase gives this stock 4 stars out of 5. The company is number 46 on Money Sense list. It is also on the Maple Money list and the Aristocrats list. One analyst says Do not buy because the company is a conglomerate. Puja Tayal on Motley Fool says the company is a diamond with a 5.5% yield. Adam Othman on Motley Fool says use this company to get a good TFSA income without overloading your tax bill. The company put out a Press Release on their 2022 results.
Simply Wall Street via Yahoo Finance reviews this company. Simply Wall Street gives this stock 4 stars out of 5. They have no risks or warnings on this company.
Power Corporation of Canada is a holding company with controlling interests in Great-West Life (an insurance conglomerate), IGM Financial (Canada's largest nonbank asset manager), and other alternative asset-management platforms (Sagard and Power Sustainable). The company also has minority interests in Groupe Bruxelles Lambert (a holding company with interests in European companies) and China AMC (an asset manager in China). Its web site is here Power Corp of Canada.
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