Opinions Ryan Bushell
Power Financial CorpPWF.TOCOMMENTJan 04, 2018
Ryan BushellStock price when the opinion was issued
As of Feb 19, 2020. Market Open.
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Ross HealyDoesn't like the merger with POW. Sell PWF and buy Aecon? Don't because Aecon has its own issues, and the merger makes sense. PWF/POW was an old-1980s structure and needed to consolidate to raise the overall value. Problem is, there's is little growth in the company's existing businesses. Mutual funds are getting crushed by ETFs, and low interest rates limit revenues. You can sell and buy something else, but not Aecon though to be fair he hasn't looked closely at it lately.
You could sit and wait to do the share swop from Power Financial into Power Corp. The two companies have been performing the same. The WestJet acquisition fits into their other subsidiaries. WestJet will be a private company and it won't be posting numbers going forwards.
David Baskin
It recently got re-amalgamated with the holding company. He prefers TD-T at these levels. He worries about the Great West Life part of PWF-T. TD-T has a bigger US presence.
Investors are quite happy with the recent news to merge this with POW-T which will drive the stock higher. He hopes they exit more businesses that aren't core, like in industrial.
PWF is a holding that she has for the income. PWF and POW are going to merge, which is driving up the value of both today. The merger is one way to close the gap between market valuations of the two. There is some thought the dividend will increase and the new entity plans to buy back shares. She will continue to hold as it an income stock. The yield is still over 5%.
Christine Poole
Greg NewmanRoss Healy
Barry SchwartzA function of how GreatWest Life does. GWO had a solid earnings that helps them. He expects 5% earnings per share growth. It's cheap at 8.8x with a well covered dividend. Not exciting but you can get dividend growth.
Greg NewmanA subsidiary of Power Corp. Power Financial gives direct exposure to Great West Life, Investors Group and Mackenzie Investments. The insurance business is tough right now as they require actuarial returns of 6% per year, which they used to be able to do with bonds when interest rates were higher. Margins are narrowing as well. It is a stock that pays a great dividend and it should provide high single-digit returns each year including the dividend. You could buy it on weakness.
The inverse to the rising interest rate question is life insurance companies, of which this company owns one. As interest rates go up, liabilities out in the future that they have to pay off, get smaller. This company is giving you almost 1.5X dividend yield over the rest of the sector. The problem is that Great West Life (GWO-T) is not the best of the lifecos. However, IGM Financial has the highest fee structure and has been a great money-maker, and the demographics are really great for wealth management. However, it’s an area where they could lose significant market share. There are better places in the sector.