As the Bank of Canada continues to lower interest rates amidst signs of easing inflationary pressures, the Canadian stock market is soaring to new highs in 2024, with the financial services sector poised to benefit greatly from these moves. That’s one of the key reasons why it could be the right time for long-term investors to buy some cheap shares of banking and financial services companies. In addition, most financial stocks in Canada also reward their investors with attractive dividends, making them even more appealing for income-focused investors.
In this article, I’ll talk about Great-West Lifeco (TSX:GWO), a top TSX-listed dividend stock from the financial services sector, and highlight why it could be a no-brainer choice for dividend investors right now.
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Great-West Lifeco stock
If you don’t know it already, Great-West Lifeco is a Winnipeg-headquartered company with a market cap of $38.8 billion. The company mainly specializes in life and health insurance, asset management, and retirement solutions, serving millions of customers globally, with a strong presence in Canada, the United States, and Europe. After surging by more than 40% last year, GWO stock currently trades at $41.60 per share with about 5% year-to-date losses.
At this market price, Great-West offers a decent 5.3% annualized dividend yield. Another key factor that makes it an amazing dividend stock to hold for the long term is its excellent dividend-growth track record. In the 10 years between 2013 and 2023, the company raised its dividend per share by a solid 72%, reflecting the underlying strength in its business performance.
A quick look at its financial growth trends
No matter how impressive a stock’s dividend-growth track record looks, you must carefully analyze its financial growth trends and growth prospects before investing in it.
Even as COVID-related operational challenges and a tough macroeconomic environment have affected businesses globally in recent years, Great-West Lifeco has maintained its strong financial performance and dividend growth. Notably, its adjusted annual earnings jumped by 31% in five years between 2018 and 2023.
While Great-West is expected to announce its second-quarter results in the first week of August, it maintained impressive financial growth in the first quarter. In the quarter ended in March 2024, the company’s adjusted earnings rose 25.3% year over year to a fresh record $1.09 per share, driven by higher earnings on surplus and increased net fee income amid strong equity market levels.
Foolish bottom line
As lower interest rates could continue to boost the financial services sector by expanding profit margins and facilitating growth in lending activities, companies like Great-West Lifeco are well-positioned to benefit. To accelerate its financial growth trends further, Great-West Lifeco continues to focus on new acquisition opportunities. For example, the recent successful integration of Prudential Financial’s full-service retirement business is likely to help Great-West Lifeco achieve significant cost synergies and boost its revenue growth in the years to come.
Besides its robust financial metrics and strategic acquisitions, the Canadian financial services firm’s efficient capital management and diversified revenue mix make it a no-brainer dividend stock to buy now and hold for the long term.
