In January, CIBC hosted another Annual Institutional Investor conference in Whistler, B.C. The conference was a veritable who’s who of the largest TSX companies. Over 100 companies attended and presented at the conference.
Do-it-yourself investors would be hard-pressed to receive an invite for this big money event, but many participating companies made the presentations slides available online.
To provide some context, the Canadian economy grew in May as the energy sector has started to turn around. Many dividend stocks have underperformed, however, leading to low price multiples at the moment.
This is the case for Emera Inc. (TSX:EMA), a mid-cap utility company with 2.5 million customers in the U.S., Canada, and the Caribbean.
Emera takeaways from the Whistler conference
The business straddles both sides of the border. U.S.-based business accounts for over 70% of earnings. Florida and New Mexico operations have worked out nicely;
90% of its electricity deals are in regulated markets, which are considered more stable markets compared to deregulated pockets. Emera plans to grow the 5.3% dividend at a rate of 8% per year for the next three years.
At the time of writing, Emera’s share price is trading near 2015 support levels.
What about this large and diversified financial and insurance company?
Shifting gears to another high yield 5.6% dividend stock, Power Financial Corp. (TSX:PWF) has a $22 billion market cap, thereby exceeding Emera’s size, and it is composed of several businesses. Power Financial did not present at the Whistler conference, however; none of the insurers did.
This stock is for income investors, but long-term shareholders will be frustrated, as the capital gains have been virtually non-existent.
Power Financial actually owns majority stake in three large companies: Great-West Lifeco, IGM Financial and Weathsimple Financial Corp. Fellow Fool contributor Mat Litalien explains how this intermixing works for the first two companies.
The most interesting piece is Wealthsimple, a private company that offers online investment management service; it’s been hard to miss the huge advertising blitz!
Power Financial owns 82% economic interest in Wealthsimple and could be the Power Financial catalyst that analysts have been calling for. The only way to track this is to review Power Financial’s quarterly statements specifically on Weathsimple, which isn’t so hard.
Based on adjusted earnings, Power Financial is relatively undervalued. This stock has an earnings growth estimate of 9% in 2019. The low price-to-earnings ratio of 12 is not a surprise, really, because the market prices this company alongside other insurance and financial stocks, which tend to covet more modest price multiples.
It isn’t sensible to compare valuations between Power Financial and Emera, but it is possible to comment on dividend health. I’d give them a thumbs up for both.
Other head-to-head comparisons are in this table:
| Ticker | Company | Dividend (%) | Debt to Equity | Last quarter cash flow growth (%) | Long-term EPS growth forecast (%) |
| EMA | Emera Inc. | 5.30% | 2.068 | 97.90% | 13.10% |
| PWF | Power Financial Corp. | 5.60% | 0.746 | -27.70% | 9% |
Source: TD Waterhouse
Take home: The long-term earnings-per-share growth forecasts for Emera and Power Financial are decent (13 and 9%, respectively). And this combined with either solid cash flow growth or relatively low debt makes these dividend stocks compelling income picks. It is fair to say that Emera is the better-liked stock and has a more decisive future outlook.
