Why Power Corporation of Canada (TSX:POW) Stock Soared 43% in 2021

Power Corporation had a good run in 2021 and is rewarding shareholders with a nice dividend increase.

| More on:
Business success with growing, rising charts and businessman in background

Image source: Getty Images

Power Corporation of Canada (TSX:POW) delivered big gains for investors in 2021, and more upside could be on the way in 2022 and beyond.

Power Corporation’s structure

Power Corporation is a Canadian holding company with investments primarily focused on insurance and wealth management. The company took Power Financial private in 2020. The subsidiary owns 66.7% of Great-West Lifeco (TSX:GWO), 61.8% of IGM Financial (TSX:IGM), and 14.1% of Group Bruxelles Lambert, a Europe-based holding company that owns positions in a number of Europe’s top global firms.

In addition, Power Corp has fintech investments and alternative asset holdings. These include Wealthsimple, Personal Capital, and Lion Electric, among others.

Great-West Lifeco saw its shares increase 25% in 2021 and IGM Financial’s share price rose 32%. This helped drive part of the gains in Power Corp. The extra boost likely came from the fact that the market started to realize the value of the sum of the parts is much higher than the value given to Power Corp stock.

Wealthsimple and Lion Electric have the potential to be significant players in their respective industries, as the fintech and electric vehicle sectors continue to grow.

Power Corp’s earnings

Power Corp reported strong Q3 2021 results, and the Q4 numbers should be decent as well. Net earnings were $1.09 per share compared to $0.75 per share in the same period in 2021. Net asset value per share rose to $52.80. This number represents management’s estimate of the fair value of the shareholder equity in the company.

At the time of writing, the stock trades for $41.65 per share, which is just 9.7 time trailing 12-month earnings.

Power Corp also announced in the Q3 report that it planned to resume share buybacks under its existing share-repurchase program, which allows the company to repurchase up to 30 million shares or roughly 5.3% of the outstanding float from February 25, 2021, to February 24, 2022.

Power Corp’s dividend

Power Corp announced a 10.6% increase in the dividend on November 15. The new distribution of $0.495 per share provides as 4.75% yield at the current share price.

The bottom line on Power Corp stock

Power Corp’s holdings are performing well, and the stock still appears undervalued based on the company’s net asset value calculations. Investors could see another aggressive share-buyback program announced in early 2022 and the dividend yield is above that of the big Canadian banks.

If you are searching for a top financial stock and like the exposure to the fintech and EV sectors, Power Corp might be worth considering for a self-directed TFSA or RRSP portfolio in 2022.

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.

The Motley Fool has no position in any of the stocks mentioned. Fool contributor Andrew Walker owns shares of Power Corp.

More on Investing

Caution, careful
Stocks for Beginners

Don’t Get Taxed by Surprise: The TFSA’s Dirty Little Secret

Did you know that you can be taxed in a Tax-Free Savings Account (TFSA)? It’s not common knowledge, but it’s …

Read more »

Question marks in a pile
Stocks for Beginners

New Investors: Do You Need Bonds in Your Investment Portfolio?

The traditional investment portfolio would have a bond and equity component. Do you really need bonds in your investment portfolio? …

Read more »

Top view of people having party, gathering, celebrating together
Investing

Plant-Based Foods Growth: Why I’m Buying This TSX Stock on the Dip

SunOpta (TSX:SOY) is a Minneapolis-based company that manufactures and sells plant-based and fruit-based food and beverage products to a variety …

Read more »

Coronavirus written newspaper close up shot to the text.
Tech Stocks

The 2 Best Tech Stocks to Buy Today for Low-Risk Investors

Overvalued tech stocks are undergoing a major correction after inflating on the back of high liquidity from fiscal stimulus packages. …

Read more »

crypto blockchain
Cryptocurrency

How Cheap Can Crypto Mining Stocks Get Before They Are Worth a Buy?

Over the last two years, during the significant rallies in the crypto industry, some of the biggest gainers and best …

Read more »

Aircraft wing plane
Coronavirus

Air Canada (TSX:AC): Is $22/Share Cheap or Expensive?

The TSX Composite Index corrected 2.3% since December 30, 2021, as tech stocks saw a huge selloff over the anticipation …

Read more »

exchange traded funds
Energy Stocks

3 Sector-Specific ETFs to Consider

Exposure to a specific sector doesn’t make sense from a diversification perspective, but it is often a good way to …

Read more »

silver metal
Metals and Mining Stocks

1 Reeling Silver Stock to Consider Today

Aya Gold & Silver (TSX:AYA) is a Montreal-based company that is engaged in the acquisition, exploration, evaluation, and development of …

Read more »