In this age of tech stocks, investing in the Power Corporation of Canada stock may look outdated. Yet, this corporation is one of the most stable and lucrative businesses in the industry.
A company’s profits are a sign of sustained value creation for investors. Even if their stock price is currently at a premium.
Although a well-funded company can operate in the red for years, it will have to turn a profit or go out of business. In such a case, owners of such companies need to have an appetite for customer subsidies. This article will provide an analysis of POW stock and its current performance on the TSX.
Overview of Power Corporation of Canada Stock
The POW is a management and holding company. It provides its customers with diversified management, renewable energy, and financial services. LifeCo, IGM Financial, and Pargesa are three of the company’s segments. In 2020, it acquired all outstanding Power Financial Corporation shares.
LifeCo provides:
- Life and health insurance
- Preparation for retirement
- Advisory on financial services for investment (see also robo advisors for professional assistance when investing)
- Reinsurance and asset management
IGM Financial, a subsidiary of IGM, provides management services and investment advisory.
Segments of Pargesa include:
- Industry-specific mineral-based solutions
- Inspection, evaluation, and certifications
- Concrete, cement, and aggregates
- Liquors and wines
- Sportswear production and distribution
- Material science and the recycling of precious metals (see also nickel stocks review)
- Chemical, oil, and gas industries
- A luxury brand with a global reach
- Hygiene products that are disposable
- Regional amusement park management and operations
How Did the Share Price of the Power Corporation of Canada Perform?
You can trade index funds these days, and your returns will almost mirror the markets (see also trading in Canada post). If you handpick particular stocks, you may earn far more. This year’s return on the Power Corp of Canada (POW) stock was 64 percent.
That is well above the market’s 28 percent without dividends. Long-term investors stand to benefit if this stock continues to perform well. Even more impressive is that over three years, POW stock has risen by a remarkable 34 percent.
By comparing profits per share and share price changes, it is possible to see how investor attitudes on a company change. The EPS of Power Corp of Canada grew by 58 percent in the last year. This increase in earnings per share is comparable to the 64 percent rise in the stock price.
That shows that the market’s perception of the power of financial corporations hasn’t altered over the last few years. It is logical to expect that the share price and earnings per share (EPS) will continue to rise.
Insiders making large acquisitions in the past year are a plus to shareholders. Profit and revenue trends are often good predictors of future performance, whether we are talking small-cap stocks, penny stocks, or blue-chip stocks.
Does Power Corp Pay a Dividend?
In the last year, Power Corporation of Canada’s shareholders received a return of 74 percent. It includes both the original investment and any later dividends paid out.
An annualized return of 13 percent for half a decade suggests that the company is doing better in recent months. Someone with a positive outlook would see the recent increase in TSR as a sign that the company is improving.
Market conditions can have an impact on stock prices. Even though other factors are as important. For example, the Power Corporation of Canada has a warning sign that you should know. They expect earnings to fall at an average of 0.9 percent each year. In their estimates for the next three years.
The Power Corporation of Canada Has a Proven Record
The company has a long history of consistent dividends payment.
In 2011, the first annual payment was CA$1.16, and the most recent fiscal year payment was CA$1.79. It means that the company’s distributions increased at an annual rate of 4.4 percent.
Although the dividend payments are consistent, the slow growth rate is less appealing.
The stock’s payment history might entice investors and brokerages. Over the past five years, the annual stock earnings per share increased by 10 percent. Investors received a return on their investment, making it a great deal.
The Dividend Payout of Power Corporation of Canada
High dividend yields are desirable, but only if the payment is stable. Power Corporation of Canada recently announced that its dividend was well covered by cash flow. According to the data, much of the company’s profits are being reinvested back for growth.
According to current estimates, earnings per share (EPS) will rise by 3.1 percent. If the dividend continues to grow at the current rate, the payout ratio could reach 47 percent next year. Which is a sustainable range.
How the Dividend of the Power Corporation of Canada Compares
Investors should consider a shareholder return in relation to the share price. If they reinvested any dividends, the TSR is a return computation. It takes into account the worth of any discounted capital raises.
For dividend-paying stocks, the TSR provides a complete picture. To put it another way, the Power Corp of Canada’s TSR in the last year was 74 percent.
It is a better return than the one projected for the company’s stock price. It should surprise no one that dividend payments account for most of the disparity.
Who Owns the Most Shares in Power Corp of Canada?
Large shareholder groups control Power Corp of Canada in the Toronto stock market (TSE: POW). There is a strong correlation between the number of insiders in a company and the company’s size.
There is a lot of power in Canada’s Power Corp and it’s valued at CA$29 billion. Institutions often control a sizable stake in a business of this scale.
The company has also attracted the interest of large investors from different business sectors.
To understand what Power Corp is about, let’s analyze its various stockholders.
What Does the Institutional Ownership of Power Corp of Canada Tell Us?
Usually, institutional investors compare their returns to well-known indexes. As a result, consumers are likely to buy more significant company stocks as part of a benchmark index.
The share registry of Power Corp of Canada already includes institutions. They have a sizable share of the business. It can suggest that the company has certain credibility among investors.
It is critical to be skeptical of claims made by institutional investors. Because they are also prone to making mistakes. In case of a sudden shift in sentiment from many institutions, the share price could drop.
Hedge funds have no significant stake in Power Corporation of Canada. Desmarais Trust holds a 15 percent stake in the business, making it the largest shareholder.
Capital Research and Management Business owns 5 percent of common stock. RBC Global Asset Management owns around 4.1 percent of the company stock.
Looking at the ownership data, the top 25 shareholders own less than half of the register. In this case, there is no single majority shareholder.
Looking into an institutional stock is a smart way to predict its performance. Analyzing analyst sentiments is a good way to do the same. If you’re interested in the stock, check what analysts say about it.
Insider Ownership in the Power Corporation of Canada
While the specific definition of an insider is open to interpretation, most of the public regard board members as insiders. To protect the shareholder’s interests, the board acts as an intermediary.
Top-level executives are often members of the board. When the firm’s top executives act as the real owners, it shows that the company is on the right track.
Although, a tiny group with a lot of insider ownership can wield a lot of power over the corporation. In these cases, it can be a bad thing. According to data, insiders own less than 1 percent of Power Corporation of Canada’s names.
Insiders can have a direct interest even if they own a private corporation or structure. Because of the company’s size, insiders are unlikely to own a significant share of the stock. In this case, they own CA$138 million in stock.
Ownership by the Public
The public owns a sizable 52 percent of Power Corporation of Canada. It shows that it is a popular stock. This level of ownership allows the public to influence critical policy choices.
For Example the makeup of the board, executive salary, and the payout ratio of dividends.
Ownership by a Private Company
According to the most recent data, private companies hold 15 percent of the company’s shares. It may be worthwhile to investigate this further. Insiders and other associates of the company should be in the company’s annual report if they own a stake in one of these private companies.
Private corporations also may have a strategic interest in the business. Also, not relatedly to this, see this earlier post that discusses trading strategy.
Bottom Line
The dividend payment schedule for the POW stock appears to be stable. There is also the possibility of future increases. The company’s earnings cover the dividends, and it’s generating a lot of cash.
Taking everything into account, this appears to be a solid dividend play. Investors value consistent dividend policies, as shown by the market’s reaction. There are other factors that investors should keep in mind when analyzing the performance of Canadian stock.
That’s why the board at Power Corporation of Canada wants you to be aware of this. For the next three years, they expect earnings to decline by an average of 0.9 percent per year.
