Great-West Lifeco: Dividend Investors Take Note

Insurance and wealth-management company Great-West Lifeco Inc. recently reported that its second-quarter profit more than doubled due to a large gain connected to the sale of its U.S. health care business.

Even without the gain, Great-West’s results exceeded expectations set by the street. Most importantly for us dividend growth investors, Great West Lifeco managed to raise its dividend by 5 per cent to 30.75 cents a share in spite of a tough financial environment.  The inherent profitability, due to more conservative and principal guaranteed investments, is one of the reasons that I was touting insurance companies back at the beginning of the “Bank meltdown”.

Following the announcement, the company’s shares increased by 3.1 per cent to $29.82 on the Toronto Stock Exchange later in the session .

Financial Highlights

Net income in the April-June quarter was $1.21-billion, or $1.36 a share, the company said. That was up from $544-million, or 61 cents a share, in the same 2007 period.

Excluding the $649-million gain on the U.S. health care business, adjusted net income was $564-million, or 63 cents a share, up 4 per cent from a year earlier.

Analysts expected that the company would announce a profit of 61 cents a share, at least  according to the estimates by Reuters.

In its Canadian business alone, the net income increased 7 per cent to $275-million.

With a Dividend yield of 3.94% and a Beta of just 0.47, Great West Lifeco could be an investors dream stock in a rocky market.

Couple those two statistics with an average dividend growth rate of 17.5% over the last 5 years and a payout ratio of less than 50% and we have a fantastic candidate for a long-term dividend growth portfolio.

Company Quick Facts

Great-West has various insurance and asset-management companies in Canada, the United States, Europe and Asia and is a is a financial services holding company with interests in the life insurance, health insurance, retirement savings, investment management and reinsurance businesses.

Great-West is controlled by Power Financial Corp., a Montreal-based financial holding company that is also one of my favorite non-bank Canadian dividend stocks.

Disclosure: The author owns shares of Power Financial Corp.

Comments

[User 63088:]

this company has almost no volume. seldom even trades. what happens you you want to sell it? so far today it traded 100 shares total. something you might have noticed in your research or mentioned in your article.

2008 Jul 31 11:46 AM

[CapNgain:]

This company is also traded on the Canadian TSX exchange, and has pretty decent (for a Canadian exchange) volume, since some consider it a blue-chip Cdn company.

If your broker can't trade Cdn listed stocks, I've found that entering an pink slips fixed-price order (taking into account the exchange rate difference) with a small spread to the bid/ask on the Cdn exchange will often get filled, even if the XXXX.pk stock hardly ever trades otherwise.

PS I've successfully held Power Financial (PWF TSX) for years, and GWO is one of it's holdings. Check their 10 year + chart...

2008 Jul 31 01:26 PM

[jjason:]

A yield of 3.94% is too low.

Check out TCLP which has a yield of around 7% and is a MLP managed by Transcanada ( the general Partner ).

Long TCLP

2008 Aug 04 05:55 AM

[truthinvesting:]

If you want a great list of dividend stocks check my free website. RAI UST MO PM KO MSFT KFT are all much better imo

2008 Aug 04 02:28 PM