Is it a good company at a reasonable price? All insurance companies had a hard time during the no to low interest rate period. They are recovering. Most of the analysts are giving a Hold rating on this stock and that seems reasonable to me. I think it is a good company. It is on the Money Sense dividend list. This stock is testing a reasonably price, but above the median at the present time.
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 accounting for Life Insurance companies changed last year under IFRS. This especially affected Revenue. I got my revenue figure from Market Screener and I cannot figure out from GWO statements and supplemental information how they got the figure they got. Information I got before on revenue type items seems no longer available.
If you had invested in this company in December 2013, for $1,015.25 you would have bought 31 shares at $32.75 per share. In December 2023, after 10 years you would have received $501.89.21 in dividends. The stock would be worth $1,359.66. Your total return would have been $1,861.55. This would be a total return of 7.21% per year with 2.96% from capital gain and 4.25% from dividends.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $32.75 | $1,015.25 | 31 | 10 | $501.89 | $1,359.66 | $1,861.55 |
If you had invested in this company in December 1993, for $1,002.24 you would have bought 348 shares at $2.88 per share. In December 2023, after 30 years you would have received $10,373.88 in dividends. The stock would be worth $15,263.28. Your total return would have been $25,637.16. This would be a total return of 16.46% per year with 9.50% from capital gain and 6.96% from dividends. This calculation takes into consideration stock splits, which means that the original cost would be lowered by these splits.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $2.88 | $1,002.24 | 348 | 30 | $10,373.88 | $15,263.28 | $25,637.16 |
The current dividend yield is moderate with dividend growth low. The current dividend yield is moderate (2% to 4% ranges) at 4.86%. The 5 and 10 year median dividend yields are good (5% to 6% ranges) at 5.51% and 5.11%. The historical median dividend yield is moderate at 3.80%. The dividend growth is low (below 8% per year) at 6% per year over the past 5 years. The last dividend increase was in 2024 and it was for 6.7%.
The Dividend Payout Ratios (DPR) are fine. The DPR for 2023 for Earnings per Share (EPS) is too high at 71% with 5 year coverage at 60%. The DPR for 2023 for Adjusted Earnings per Share (AEPS) is fine at 53% with 5 year coverage at 56%. This is more important than the DPR for EPS. The DPR for 2023 for Cash Flow per Share (CFPS) is good at 37% with 5 year coverage at 22%. The DPR for 2023 for Free Cash Flow (FCF) is good at 31% with 5 year coverage at 23%.
| Item | Cur | 5 Years |
|---|---|---|
| EPS | 70.99% | 60.03% |
| AEPS | 52.95% | 55.99% |
| CFPS | 37.28% | 22.43% |
| FCF | 31.25% | 22.99% |
Debt Ratios are fine. The Long Term Debt/Market Cap Ratio for 2023 is fine at 5.72 and currently at 5.44. However, we need also to look at the Long Term Debt/Covering Assets Ratio for 2023 which is good at 0.91 and currently at 0.94 because this is a more important one for a Financial. The Liquidity Ratio for 2023 is too low at 0.99 and 0.86 currently. If you added in Cash Flow after dividends, the ratios are fine at 1.25 and currently at 1.12 as this is not an important ratio for financials. The Debt Ratio for 2023 is low at 1.04 and 1.04 currently. This ratio at 1.04 is ok for financials.
| Type | Year End | Ratio Curr |
|---|---|---|
| Lg Term R | 5.72 | 5.44 |
| Lg Term A | 0.91 | 0.94 |
| Intang/GW | 0.38 | 0.37 |
| Liquidity | 0.99 | 0.86 |
| Liq. + CF | 1.25 | 1.12 |
| Debt Ratio | 1.04 | 1.04 |
The Total Return per year is shown below for years of 5 to 35 to the end of 2023. 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. |
|---|---|---|---|---|---|
| 2018 | 5 | 5.98% | 14.75% | 9.25% | 5.50% |
| 2013 | 10 | 5.39% | 7.21% | 2.96% | 4.25% |
| 2008 | 15 | 3.74% | 10.18% | 5.13% | 5.04% |
| 2003 | 20 | 6.76% | 7.53% | 3.37% | 4.17% |
| 1998 | 25 | 9.40% | 9.33% | 4.98% | 4.34% |
| 1993 | 30 | 12.39% | 16.46% | 9.50% | 6.96% |
| 1988 | 35 | 10.53% | 16.66% | 10.12% | 6.54% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are 8.69, 10.24 and 11.99. The corresponding 10 year ratios are 10.91, 12.36 and 13.43. The corresponding historical ratios are 10.65, 12.41 and 13.81. The current P/E Ratio is 10.66 based on a stock price of $45.65 and EPS estimate for 2024 of $4.28. This 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 also have Adjusted Earnings per Share (AEPS) data. The 5-year low, median, and high median Price/Earnings per Share Ratios are 8.30, 9.82 and 11.97. The corresponding 10 year ratios are 9.27, 10.54 and 12.12. The current P/AEPS Ratio is 10.49 based on a stock price of $45.65 and AEPS estimate for 2024 of $4.35. 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 $51.37. The 10-year low, median, and high median Price/Graham Price Ratios are 0.73, 0.84 and 0.96. The current P/GP Ratio is 0.89 based on a stock price of $45.65. The current ratio is between the median and high ratios of 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/Book Value per Share Ratio of 1.59. The current ratio is 1.69 based on a stock price of $45.65, Book Value of $25,136M and Book Value per Share of $26.97. The current ratio is 6.5% 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 2024 of $26.34. This implies a Book Value of $24,553M and a ratio of 1.73 based on a stock price of $45.65. This ratio is 9% 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 ratio is 7.58 based on a stock price of $45.65, Cash Flow for the last 12 months of $5,612M, and Cash Flow per Share of $6.02. The current ratio is 52% 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 3.80%. The current dividend yield is 4.86% based on a stock price of $45.65 and dividends of $2.22. The current dividend yield is 28% 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 5.11%. The current dividend yield is 4.86% based on a stock price of $45.65 and dividends of $2.22. The current dividend yield is 5% below the historical median dividend yield. This stock price testing suggests that the stock price is relatively reasonable but above the median.
The 10-year median Price/Sales (Revenue) Ratio is 0.73. The current ratio is 0.63 based on a stock price of $45.65, Revenue estimate for 2024 of $67,688M, and Revenue per Share of $72.62. The current ratio is 14% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median. I would not trust this test as the rules on how to calculate Revenue for Insurance Companies have changed. I had a hard time trying to figure out revenue for this company and I do not know how the analysts are calculating revenue estimates.
Results of stock price testing is that the stock price is could be reasonable. The 10 year median dividend yield test says that the stock price is reasonable but above the median. My testing is showing the stock price from Cheap to Reasonable to Expensive.
When I look at analysts’ recommendations, I find Strong Buy (1), Hold (9) and Underperform (1). The consensus would be a Hold. The 12 month price target is $44.09 with a high of $47.00 and a low of $41.00. The 12 month target price implies a total return of 1.45% with a capital loss of 3.42% and dividends of 4.86% based on a current stock price of $45.65.
There are 6 analysts reviews on Stock Chase for 2024, of which 5 are buys and one Do Not Buy. The Do Not Buy says the stock is too expensive. Other like this company. Stock Chase gives this stock 4 stars out of 5. Aditya Raghunath on Motley Fool says this is a top dividend stock selling at a cheap valuation. Jitendra Parashar on Motley Fool says lower interest rates will drive it to new highs. The company put out a Press Release about their fourth quarter of 2023 results. The company put out a Press Release about their second quarter of 2024.
Simply Wall Street via Yahoo Finance put out a review on this stock. Simply Wall Street lists not risks or warnings for this company. Simply Wall Street gives this stock 3 and one half stars 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 company operates the second-largest recordkeeping business under the Empower brand in the United States. Its web site is here Great-West Lifeco Inc.
The last stock I wrote about was about was Wajax Corp (TSX-WJX, OTC-WJXFF) ... learn more. The next stock I will write about will be Granite REIT (TSX-GRT.UN, NYSE-GRP.U) ... learn more on Monday, September 23, 2024 around 5 pm.
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