Power Financial Corp (PWF.TO)

Power Financial (PWF-T) or Power Corp. (POW-T)? This is basically a function of Investors Group, Mackenzie Financial and Great West Life. If you want a pure play, he feels you should go with this. It pays a bigger dividend, and believes it is trading at a bigger discount to its 10-year historical average. Likes both, but sees this as having 6% annual dividend growth over the next couple of years, decent earnings growth, and trading at about a 19% discount.

This has basically been stuck in a big, big range and is going nowhere. Recently it has made a series of lower highs, which is not a good sign. It means sellers are willing to accept lower prices. At around $29-$30, it seems to have made several bottoms, but the more times these test support, the more likely it will break. It means the sellers are saying they don’t care that there have been buyers before, they still want to Sell.

A financial holding company of the Demarais family. It holds controlling interest in Great West Life (GWO-T) and IGM along with Putnam Financial in the US along with a lot of European assets. The stock has lagged, mainly because Great West Life is a lifeco which have not performed as well the banks. When interest rates go up, the lifecos will perform better.

An unloved, but diversified business. They are in the process of diversifying even more. A lot of their recent acquisitions, such as Borrowell and Wealthsimple, although small can actually be considerably disruptive to the investment industry. They are tied to robo-revisery services. Dividend yield of 5.2%.

This and other insurance type of companies have had a bit of a tough go lately. This one has fallen for quite some time and is below its 200 day moving average which is falling. Hopefully this will start to base with interest rates eventually moving higher. Some things that are hurting the stock is that 30% of its revenues are coming from Europe and that it is 87% insurance.

It is probably not going to improve over the next 5 years. The fees they generate relate to assets under management. The easy money has been made in the markets.

Pays a great dividend which is well covered. The stock has not been performing as well as he would have hoped, but no insurance companies really are at the moment. The overall business is doing okay; they just can’t manage to string together good quarters of beating expectations. The earnings multiple is trading below its 10-year average, so this is a decent time to buy the stock and is a position that you can put away in your portfolio and forget about.

The mutual fund business is undergoing a great deal of change in Canada. There is a lot of talk that mutual fund fees are too high relative to other countries, and the Canadian industry needs to bring those fee levels down. The potential elimination of trailer fees will have an impact. Doesn’t think there is any particular risk around the 5.3% dividend yield.

He became really concerned with the mutual fund sales aspect of this company. Thinks ETF’s are going to kill the mutual fund business. He moved out of this and bought Sun Life (SLF-T) instead.

It is still trading at a discount. There are some things weighing it down. There are concerns in the mutual fund industry regarding fees. You have to keep this in mind. However, the family is very committed to this company and if anyone can figure it out, they can. The 5% dividend is safe. If markets continue to move higher you want to hold the investment managers.

Great West Life (GWO-T) has been the best performer of the insurance group, because it is the least sensitive to low rates, but has about 40% of its business in Europe. Investors Group has CRM2 coming, which is a negative for mutual fund companies. He recently sold his holdings. Longer-term, you can hold it for the dividend, which will slowly increase, and he thinks the stock might not do too much for the next year or so. Dividend yield of 4.8%.

A lot of mutual fund investors have no idea about deferred sales charges and trailer fees. CRM2 is being mandated by the Canadian Security regulators, which means there is going to be more disclosure, and the rules are going to be much stricter on the deferred sales charges and trailer fees. It won’t be crippling for this company, but it will be a substantial impediment.

Feels the dividend is safe, but in their underlying components, a big part are mutual funds, which he is quite negative on. With CMR II, a disclosure for retail investors, it could put a squeeze on margins. Expects the growth will come from the Great West Life (GWO-T) portion.

This is all encompassing within the investment industry. It has exposure to Great West Life (GWO-T), Investors Group and Mackenzie. All those components that are working together. The payout ratio is very sustainable and you are getting a yield of about 4%. They will keep increasing the dividend. He is looking to buy a little bit more under $30.

There are a couple of issues. Growth is slow and it is not going to get a higher multiple. Also, their core businesses are under a little pressure. This is a sum of their parts, and if the pieces are not going to grow very fast, then the sum is not going to grow either. The dividend should be safe.