Dividend Stock Analysis: Great-West Lifeco Inc (TSE: GWO)
I have made a change to my stock analysis template this week, I am going to stop looking at the return on equity and the debt to equity values and instead replace them with the Graham number of the stock. I believe this change more suits my style of investing and brings us to a more valued approach. The Graham Number tells us a price, and if the price of the stock falls below this number then it is a good time to buy the stock and it will receive a full point in my analysis.
Today I thought That I would cover a financial services holding company that has interests in insurance, and investment management. Seeing as this is my first stock analysis after becoming an associate member of the DIV-Net, I hope you enjoy todays analysis and please let me know in the comments what you thought, or if you have any constructive criticism for my analysis template.
About the company:
Here is Great-West Lifeco's description of what they do, which can be found on their website here
The Corporation has operations in Canada, the United States, Europe and Asia through The Great-West Life Assurance Company, London Life Insurance Company, The Canada Life Assurance Company, Great-West Life & Annuity Insurance Company and Putnam Investments, LLC.
Lifeco and its companies have more than $394 billion in assets under administration and are members of the Power Financial Corporation group of companies."
What the professionals think:
| Source | Value | Score |
|---|---|---|
| Is it a Dividend Aristocrat: | Yes | 0.5 |
| Is it a Dividend Achiever: | Yes | 0.5 |
| Globe Investor Rating: | 4 Stars | 0.25 |
Score: 1.25/1.5
Dividend performance:
Dividend Information acquired at DividendInvenstors.ca
| Measurement | Value | Measurement | Value |
|---|---|---|---|
| Dividend Rate: | $1.17 | Quarterly Dividend Rate: | $0.2925 |
| Current Dividend Yield: | 4.00% | 5 yr. Avg. Dividend Yield: | 2.50% |
| 3 yr. Dividend Growth: | 20.64% | 5 yr. Dividend Growth: | 17.89% |
| Payout Ratio: | 44.00% | 5 yr. Historic Payout Ratio: | 40.00% |
| Measurement | Value | Score |
|---|---|---|
| Is current Yield > Avg Yield: | Yes | 1 |
| > 10% dividend growth per year: | Yes | 1 |
| > 5 yrs of dividend growth: | Yes | 1 |
| payout ratio <= historic payout ratio: | Yes Edit: Should be No | 1 Edit: Should be 0 |
Score: 3.0/4.0
Edited to 3.0 from 4.0
Fundamentals:
All fundamentals based on 2007 annual report, and the latest market close share price of $29.10
| Measurement | Value | Score |
|---|---|---|
| Earnings per share (EPS): | 2.36 | - |
| Is EPS growing: | Yes | 0.5 |
| Net Profit Margin: | 8.14 | - |
| Is Net Profit Margin growing: | Yes | 0.5 |
| Price/Book Ratio (P/B) < 0.80: | 2.39 | 0 |
| Price/Earnings Ratio (P/E) < 15: | 12.33 | 0.5 |
| Price/Sales Ratio (P/S) < 1.5: | 1.00 | 0.5 |
| Is the Graham Number > stock price: | $25.45 | 0 |
Score: 2.0/3.5
Technicals:
Chart Acquired at StockCharts.com
| Measurement | Value | Score |
|---|---|---|
| 200 day Simple Moving Average direction: | Down | 0 |
| Indicators show a good time to buy (MACD, SSTOCH, RSI): | No | 0 |
Score: 0/1.0
Total Score: 6.25/10
Edited to 6.25 from 7.25
Notes:
- On the daily chart the technicals look like TSE: GWO might be in store for a bit of a rebound in price, but as soon as you look at the weekly chart (not shown here) you notice that the stock is still on a downward path. Hence the 0 points gained in the technical score.
Summary:
Great-West Lifeco Inc (TSE: GWO) scored really well, so it gets a BUY rating based on its score, but I personally would hold off for a little bit longer on any purchases, this is because the technicals show it might have a bit more to lose before it starts to regain its price. It doesn't have much further to go in order to reach the Graham number, so I would say buy the stock if hit goes below $25.45. I am still a bit hesitant to enter any positions in the financial world because even though people have seemed to have forgotten all the troubles that happened not too long ago. I don't think the institutions are out of the clear yet. This is especially true for the big Canadian banks. But for now, I am really confident that we have a superb dividend based stock here, it has been able to whet my appetite, now I just need to wait for it to fulfill my value and technical signals for it. On the value end, like I said before, I would like to see the price go below $25.45 and on the technical end, I want to see a change in direction on the daily chart and a positive direction in the weekly chart.
Lets keep our eyes on this stock, and see where it goes. What are your thoughts on GWO ? Please share them in the comments below!
Recommendation:Buy, but I would wait until the price goes below $25.45 and the technicals look a little better.
Full Disclosure: I currently do not own shares in Great-West Lifeco Inc (TSE: GWO)
Disclaimer: Any information contained in the above article represents my opinions only, and should not be construed as personalized investment advice. I cannot assess, verify or guarantee the suitability of any particular investment to any particular situation and the reader of the article bears complete responsibility for its own investment research and should seek the advice of a qualified investment professional that provides individualized advice prior to making any investment decisions. All opinions expressed and information and data provided therein are subject to change without notice.
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Thanks for catching my error!
Slackerwealth,
Thanks for catching my slip up, the payout ratio should have been a No, and hence a 0 score.
I have been meaning to put together a post that has an explanation of my weighting system as well as why I use what I do. But I just
haven't put it together yet. The other reason, is my analysis is still in a 'liquid' state, I am still trying to get it "just right" if you know what I mean. I don't want to put up an explanation until I feel that its not going to change again, or at least for a while. I would like to hear any recommendations from users to add / change in my analysis, if you have any helpful tips!
For the Aristocrat score, I give each of the 3 'professionals' a 0.5 point, I figured just to give them each an equal weighting there. the only exception is the Globe Investor Rating, which gives s 0.25 for a 4 star and a 0.5 for a 5 star (0 for anything less then 4 star)
YES, the dividend achiever status is based on Mergents Canadian Index.
Thanks for the kind words, I'm definitely going to try to keep it up :-)
Let me know if you have any requests for any stocks you would like to see!
Very good analysis
I have a few of questions though.
First, how do you determine the score values? For example, you give GWO 0.5 for being a dividend aristocrat. Why not a 1 or 0.25? Does it depend on how many years it has raised its dividend? Just curious about your methodology and score weighting system.
Second, is the company's dividend achiever status based on Mergent's Canadian index?
Third, you have a value of yes for "payout ratio <= historic payout ratio." However, you list the current payout ratio as 44% while the 5 year average is 40%. I don't quite understand, unless you're using something other than the 5 year average for the historic payout ratio or one of the figures has a typo.
Overall, I think you provide a great quantitative summary. Keep up the good work.