Is it a good company at a reasonable price? I would not buy this company because I own Power Corp, which owns this company. A negative is that it has not always produced an 8% total return. I would personally like a cheap price because of this and the price is only reasonable. I expect that the company will do better in the future and in the mean time you get a good dividend yield. So, that is suggesting to buy for passive income. Stock price testing is suggesting the stock price is reasonable.
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 Corp. (TSX-POW). Great West Lifeco Inc. is one of the companies under Power Corp. (TSX-POW).
When I was updating my spreadsheet, I noticed the company sold Putnam Investments. This seems to be affecting Revenue and earnings, according to the second quarter of 2023. It is really hard to tell how much until I see the annual report for 2023. Some estimate for 2023 and 2024 seems to take this into account and others do not. But it would appear that Revenue will drop from some $44B to $10B. See the Press Release.
Earnings per Share does not seem to be affected that much with estimate at $3.82, with a low of $3.71 and high of $3.87. The EPS for 2022 was $3.36. The sale does not appear to have affected the dividend. Analysts expect the dividend to continue to increase.
If you had invested in this company in December 2012, for $1,022.70 you would have bought 42 shares at $24.35 per share. In December 2022, after 10 years you would have received $644.28 in dividends. The stock would be worth $1,314.60. Your total return would have been $1,958.88. This is a total return would be a loss of 8.05% per year with 2.54% from capital gain and 5.51% from dividends.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $24.35 | $1,022.70 | 42 | 10 | $644.28 | $1,314.60 | $1,958.88 |
If you had invested in this company in December 1992, for $1,008.68 you would have bought 538 shares at $1.86 per share (taking into consideration stock splits). In December 2022, after 30 years you would have received $14,952.37 in dividends. The stock would be worth $16,839.40. Your total return would have been $31,791.77. This is a total return would be a capital gain of 18.68% per year with 9.87% from capital loss and 8.81% from dividends.
I doubt over the next 30 years investors will earn the same as dividend increases and capital gain increases have greatly slowed over the past 30 years.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $1.86 | $1,008.68 | 538 | 30 | $14,952.37 | $16,839.40 | $31,791.77 |
If you had invested in this company in December 2007, for $1,31.53 you would have bought 29 shares at $35.57 per share. In December 2022, after 15 years you would have received $622.34 in dividends. The stock would be worth $907.70. Your total return would have been $1,530.04. This is a total return would be a loss of 3.80% per year with 0.85% from capital loss and 4.15% from dividends.
Insurance companies were harmed by a long period of very low interest rates. Investors should do better in the present with better interest rates than they have in the recent past. People who did stay with this company got good dividends. The main reason for the low return is that the stock price in 2007 hit a high that it did not hit again until 2017. This shows up in the high P/S Ratio score of 1.23, when at that time the 10 year median was 0.77. The P/S Ratio of 1.23 is 60% above the median of 0.90.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $35.57 | $1,031.53 | 29 | 15 | $622.34 | $907.70 | $1,530.04 |
The current dividend yield is good with dividend growth low. The current dividend yield is good (5% to 6% rates) at 5.06%. The 5 year median yield is also good at 5.35%. The 10 year and historical median dividend yields are moderate (2% to 4% ranges) at 4.62% and 3.79%. The dividend growth is low (below 8% per year) at 5.95% per year over the past 5 years.
The Dividend Payout Ratios (DPR) are good. The DPR for 2022 for Earnings per Share (EPS) is 58% with 5 year coverage at 57%. The DPR for 2022 for Adjusted Earnings per Share (AEPS) is 57% with 5 year coverage at 56%. The DPR for 2022 for Cash Flow per Share (CFPS) is 26% with 5 year coverage at 21%. The DPR for 2022 for Free Cash Flow (FCF) is 23% with 5 year coverage at 20%.
| Item | Cur | 5 Years |
|---|---|---|
| EPS | 58.33% | 56.72% |
| AEPS | 56.78% | 55.60% |
| CFPS | 25.92% | 20.66% |
| FCF | 23.06% | 20.12% |
Debt Ratios are fine. Financials are looked at differently that other companies and this depends on what type of financial the company is. For this company it is the Long Term Debt/Covering Assets Ratio that is important and for 2022 it is 0.89 and the current one is 0.95. This need to be less than 1.00. The other important one is Debt Ratio. For this company it is 1.05 at the end of 2022 and 1.04 currently. For this ratio 1.04 or higher is fine.
| Type | Year End | Ratio Curr |
|---|---|---|
| Lg Term R | 8.49 | 5.92 |
| Lg Term A | 0.89 | 0.95 |
| Intang/GW | 0.58 | 0.39 |
| Liquidity | 1.20 | 1.21 |
| Liq. + CF | 1.63 | 1.29 |
| Debt Ratio | 1.05 | 1.04 |
| Leverage | 21.70 | 23.98 |
| D/E Ratio | 20.70 | 22.98 |
The Total Return per year is shown below for years of 5 to 34 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. |
|---|---|---|---|---|---|
| 2017 | 5 | 5.95% | 2.91% | -2.27% | 5.18% |
| 2012 | 10 | 4.77% | 8.05% | 2.54% | 5.51% |
| 2007 | 15 | 4.18% | 3.30% | -0.85% | 4.15% |
| 2002 | 20 | 7.37% | 7.39% | 2.46% | 4.92% |
| 1997 | 25 | 9.90% | 10.20% | 4.83% | 5.37% |
| 1992 | 30 | 12.17% | 18.68% | 9.87% | 8.81% |
| 1988 | 34 | 10.67% | 16.46% | 9.35% | 7.12% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are 8.69, 10.42 and 11.86. The corresponding 10 year ratios are 10.80, 12.36 and 13.43. The corresponding historical ratios are 8.26, 12.39 and 17.25. The current P/E Ratio is 12.92 based on a stock price of $41.10 and EPS estimate for 2023 of $3.18. The current 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 also have Adjusted Earnings per Share (AEPS) data. The 5-year low, median, and high median Price/Adjusted Earnings per Share Ratios are 8.34, 10.14 and 11.97. The corresponding 10 year ratios are 10.10, 11.58 and 12.78. The current P/AEPS Ratio is 10.76 based on a stock price of $41.10 and AEPS estimate for 2023 of $3.82. The current 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 Graham Price of $42.14. The 10-year low, median, and high median Price/Graham Price Ratios are 0.80, 0.90 and 0.99. The current P/GP Ratio is 0.89 based on a stock price of $41.10. 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 10-year median Price/Book Value per Share Ratio of 1.57. The current ratio is 1.66 based on a Book Value of $23,128M, Book Value per Share of $24.82 and a stock price of $41.10. The current ratio is 5% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I also have a Book Value per Share estimate for 2023 of $24.10. This implies a Book Value of $22,458M and a P/B Ratio of 1.71 based on a stock price of $41.10. The current ratio is 8% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get a 10-year median Price/Cash Flow per Share Ratio of 4.98. The current P/CF Ratio is 14.29 based on Cash Flow for last 12 months of $2,681 and a stock price of $41.10. The current ratio is 187% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive. The Cash Flow is unusually low because of a negative cash flow for the second quarter of 2023.
Looking at Cash Flow excluding Working Capital, you get the opposite result. I get a 10-year median Price/Cash Flow per Share Ratio of 4.88. The current P/CF Ratio is 0.88 based on Cash Flow excluding WC for last 12 months of $43,415 and a stock price of $41.10. The current ratio is 82% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
I get an historical median dividend yield of 3.79%. The current dividend yield is 5.06% based on dividends of $2.08 and a stock price of $41.10. The current yield is 34% 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 4.62%. The current dividend yield is 5.06% based on dividends of $2.08 and a stock price of $41.10. The current yield is 9% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively reasonable and below the median.
The 10-year median Price/Sales (Revenue) Ratio is 0.73. The current P/S Ratio is 0.57 based on Revenue estimate for 2023 of $67,301M, Revenue per Share of $72.22 and a stock price of $41.10. The current ratio is 22% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap. This may not be a valid test.
There is a problem with Revenue. I am taking the average estimate, but range starts at $10,150M. Great West sold Putnam Investments and this together with accounting changes seems to be pointing to a big reduction in Revenue, or a big change in Revenue measurement. The Quarter 2 results for 2023 seem to point to an increase revenue between June 2022 and June 2023 in how they are now calculating revenue. However, I do not have enough data to come to any conclusions about how the P/S Ratio is changing.
Results of stock price testing is that the stock price is probably reasonable. The 10 year median dividend test points to this. Another good valid test here is the P/GP test and this points to a reasonable price.
When I look at analysts’ recommendations, I find Hold (9) and Underperform (1). The consensus would be a Hold. The 12 months stock price is $41.20. This implies a total return of 5.30% with 0.24% from capital gains and 5.06% from dividends.
Few analysts on Stock Chase like this stock. Some say they prefer banks to Life Insurance companies, others that they like Manulife (TSX-MFC) better. Stock Chase gives this stock 5 stars out of 5. It is on all the dividend lists I follow of Money Sense, Maple Money, and Aristocrats. Christopher Liew on Motley Fool says this is a high recommended Wealthsimple stock. Ambrose O'Callaghan on Motley Fool says this is a red hot TSX stock to own this summer. The company put out a Press Release for their 2022 year end results. The company put out a press release on Newswire about their results for the second quarter of 2023.
Simply Wall Street on Yahoo Finance look at this stock and its dividend. Simply Wall Street puts out one warning of profit margins (4.2%) are lower than last year (8.7%) for this stock. Simply Wall Street gives this stock 3 and one half star out of 5.
Great-West Lifeco provides life insurance, health insurance, retirement products, asset management, recordkeeping services, and reinsurance products in Canada, the United States, and Europe. The Canada business has leading market positions in group insurance, group retirement, and individual insurance. The company operates the second-largest recordkeeping business under the Empower brand in the United States. Great-West Lifeco also offers various products across Europe markets with a strong presence 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 Granite REIT (TSX-GRT.UN, NYSE-GRP.U) ... learn more on Friday, September 22, 2023 around 5 pm. Tomorrow on my other blog I will write about Accounts I Have .... learn more on Thursday, September 21, 2023 around 5 pm.
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