March 24th, 2011 | 
Category: 
Still afraid of investing in life insurance companies? Their may be a one ready to make it in your portfolio. Great-West LifeCo (TSE:GWO) started as an insurance company and like many of its competitors, it has turned itself into a financial company operating in many of the financial sectors:
- Life Insurance
- Health Insurance
- Asset Management
- Investment and Retirement Savings
- Reinsurance Business
Great-West LifeCo is part of the holdings by Power Financial which I reviewed last week. The holdings from Power Financial were impressive and Great-West LifeCo also has an interesting set of holdings:
- The Great-West Life Assurance Company
- London Life Company
- The Canada Life Assurance Company
- Great-West Life & Annuity Insurance Company
- Putnam Investment, LLC
The company has over $485 billion in assets under management and operates in Canada, the United States, Europe and Asia.
Quick Facts
- Stock Ticker: GWO on TSX
- Market Cap.: 24.01B$
- P/E: 14.50
- Forward P/E: 10.40
- EPS: $1.75
- Beta: 0.92
- Quarterly Dividends: $0.31
- Dividend Yield: 4.90%
- Dividend Payout Ratio: 70.29%
- ROE: 14.26%
- 5 Year EPS Growth Average: 0.67%
- 5 Year Dividend Growth Average: 8.90%
- 52-Week Low: $23.37
- 52-Week High: $29.24
- 52-Week Range: 33.22%
GWO Dividend Growth
Just like its parent company, Great-West LifeCo was removed from the Canadian Dividend Aristocrats list this past December for failing to increase its dividends. It follows the pattern of most financial institutions in Canada due to the financial crisis of late 2008. Up until 2009, GWO had at least 13 years of dividend growth. As you can see, historical growth was consistent and above inflation with a 5 year average of 8.9% growth including the recent flat years.
GWO Dividend Payout Ratio
I like what I see before 2008. The ratio was relatively consistent and within a good range that still allow the company to grow. A 40%-60% average is in line with most financial companies as well. The question is when are they expected to make it back to those level. If the forward P/E is any indicator, it looks promising for a return to normal level in the coming years.
GWO EPS Growth
Same story as the payout ratio. I like what I see before 2008 and I like that the drop was only for 1 year with signs of growth, albeit slow, for the following years.
Thoughts
When looking at a few of technical points such as price within 52 week range, Forward P/E and Beta, the company appears to show future potential as an investment with growth. It may be price for an entry point with the recent drop. Its return on equity is attractive while providing a good dividend. One key question is do you go for its parent company, Power Financial, or even the parent company of the parent, Power Corporation?
Readers: Is Great-West LifeCo attractive at this price and yield?
Full Disclosure: At the time of writing I hold no position.
I bought GWO last year and while the price hasn’t gone anywhere for a year I also see the potential for things to start picking up in this industry. A dividend increase this year would be nice.
Echo recently posted..Installing An Underground Sprinkler System
[...] Dividend Yield: Great-West LifeCo (TSE:GWO) @ The Passive Income [...]
[...] financial company operating in many of the financial sectors: Life Insurance Health Insurance … – ReadmoreDoes your spouse constantly give you excuses of staying back late to complete office work?Are you [...]
I like GWO, no doubt, but I like PWF better, I get more diversification with PWF (in IGM). Almost same stock price and yield, although PWF has moved up in price lately, unfortunately.
I will own POW eventually, maybe for my wife’s TFSA, but not for another year or so. I have time, the price of POW hasn’t moved in a couple of years.
My Own Advisor recently posted..February 2011 Dividend Income Update
[...] storm better than Manulife, which lost big. The major competitors in Canada are Great West LifeCo and [...]
[...] Life and Great West LifeCo both have a similar yields with a good history of dividend growth. Comparing them to each other, [...]
[...] companies were beaten harder than the financial sector in my opinion during the financial crisis. GWO is holding back PWF a little and I feel it can be a great moment to get into it. I have been [...]