Great West Lifeco Deserves A Look From Dividend Investors

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.

Full Disclosure: The author owns shares of Power Financial Corp.

4 comments

  1. Richard,
    I would have to say that if you are just starting out with dividend growth investing, buying the whole company (ie. POW.TO) is the best strategy for pure diversification. However, the company’s investment arm has struggled recently and the better returns have come from GWO.
    Just my $0.02.

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