Does Great-West Lifeco Inc. Offer Investors the Best Value Today Among Canada’s Life Insurers?

Great-West Lifeco Inc.’s (TSX:GWO) dividend, at 4.72%, is considerably higher than those of its peers. Does that make it the best pick among Canada’s life insurers? Click to find out.

| More on:

Winnipeg-based Great-West Lifeco Inc. (TSX:GWO) is coming off an encouraging fourth-quarter performance that saw the company record sales growth of 13% and adjusted net earnings growth of 5% year over year.

Yet thanks to a recent pullback in its share price, Great-West may very well be offering investors the best value among the Canadian life insurance companies.

A closer look at fourth-quarter results

In reporting its fourth-quarter and year-end results, Paul Mahon, CEO of Great-West, pointed to strong top-line growth in combination with controlled spending, which helped to drive the company’s strong performance.

But the real story came out of the company’s Canadian operations.

Following the realignment of Canadian operations, Great-West continued to make progress on targeted expense reductions, achieving $123 million of its $200 million cost savings goal through the end of the 2017 fiscal year.

That helped to improve earnings growth by 10% after accounting for the U.S. tax reform, an impressive accomplishment.

Earnings drive a fourth consecutive annual dividend increase

That strong performance helped to drive the company’s fourth annual dividend increase, this time raising its quarterly payout by just shy of 6% and giving Great-West stock a forward dividend yield of 4.72%.

Great-West’s current 4.72% dividend yield is considerably higher than peers Sun Life Financial Inc. (TSX:SLF)(NYSE:SLF) and Manulife Financial Corporation (TSX:MFC)(NYSE:MFC), which have yields of 3.55% and 3.75, respectively.

Why now might be a good time to initiate a position in Great-West stock

Despite encouraging performance in 2017, Great-West shares have fallen 9% since late October and now finds itself less than a couple of bucks above its 52-week lows.

While stocks that are at or near their 52-week lows are generally a good idea to begin with, what’s more in the case of Great-West stock is that the shares now find themselves resting just atop the company’s 200-week and 50-month moving averages.

Moving averages are technical indicators that can help traders and investors identify if a particular stock is showing signs of strength or weakness.

Stocks that remain above their moving averages indicate a “bullish” sentiment — that investors are still firmly behind a stock.

Some say that cases like Great-West stock, where the shares are just above their moving average, present the best buying opportunities, as the company isn’t overly expensive but still maintains a bullish sentiment in the market.

Bottom line

Peer Manulife is considerably larger than both Great-West and Sun Life with a market capitalization of $46.5 billion compared to $32 billion for the latter two.

And there is certainly safety in numbers, with that statement being particularly true of insurance companies.

But if you’re will to gamble a little on a smaller player that might have more to gain, Great-West is probably the better option compared to Sun Life; Sun Life stock is currently sitting just off its 52-week and all-time highs, making the Great-West appear to be more attractive trade on a risk-return basis.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Jason Phillips has no position in any of the stocks mentioned.

More on Dividend Stocks

edit Person using calculator next to charts and graphs
Dividend Stocks

Better Buy: Fortis Stock vs Enbridge

Fortis stock and Enbridge are top dividend stocks on the TSX today. Which stock is better buy for safe dividend…

Read more »

Canadian Dollars
Dividend Stocks

How to Make $1,500 in Passive Income 4 Times a Year

Blue-chip TSX stocks such as Enbridge can enable investors to create game-changing wealth over the long term.

Read more »

IMAGE OF A NOTEBOOK WITH TFSA WRITTEN ON IT
Dividend Stocks

TFSA: How to Easily Turn $10,000 Into $500/Year of Passive Income

You don't need to be a stock market expert to turn $10,000 into a $500 of tax-free passive income. Here's…

Read more »

protect, safe, trust
Dividend Stocks

Worried About a Recession? 2 TSX Blue-Chip Stocks to Protect Your Capital

If you fear a recession coming on soon, here are two blue-chip Canadian stocks to add to your portfolio for…

Read more »

Silver coins fall into a piggy bank.
Dividend Stocks

New TFSA Investors: 2 Top TSX Stock to Create a Self-Directed Retirement Fund

Top TSX dividend stocks are now on sale for new TFSA investors.

Read more »

money while you sleep
Dividend Stocks

Worried About the Market? 2 Dividend Stocks That Let You Sleep at Night

Here's why Restaurant Brands (TSX:QSR) and Enbridge (TSX:ENB) are two top dividend stocks to buy in this uncertain market right…

Read more »

money cash dividends
Dividend Stocks

How 1 Absurdly Cheap Stock Can Generate $100 in Monthly Passive Income

You can generate $100 or more in monthly passive income from one high-yield stock trading at an absurdly cheap price…

Read more »

Retirees sip their morning coffee outside.
Dividend Stocks

How I’d Invest $1000 in February to Make Easy Passive Income

Looking to earn some extra passive income in February but don't have much cash? Build an easy portfolio with these…

Read more »