Great-West Lifeco: Buy, Sell, or Hold in 2025?

Great West stock was a top investment last year, but what does 2025 hold?

Amy Legate-Wolfe

Author Bio Amy became interested in investing in 2018 after having her first daughter. After receiving a masters degree in journalism from Western University, she became frustrated that the finance industry remained a confusing place for Canadians like her: new parents, millennials, and other young people who needed to understand their finances. Now, Amy focuses on tech companies and renewable energy for growth opportunities, coupling that with long-term investing strategies and equities. She also provides investors with a daily newsletter, Canada Stock Digest, for daily market updates. Her work can also be found at Canada's National Observer, where she writes on the business side of climate action. Before joining Motley Fool Canada, Amy wrote for major news organizations including HuffPost, CTVNews.ca, and CBC. When she’s not researching investing strategies, Amy’s time is pretty much monopolized by her two wild daughters, but in what little spare time she has she loves to do yoga, go on walks with her dog, and travel with her husband. Social Media Follow Amy on LinkedIn and Canada Stock Digest. Favorite Investment Quote “October: This is one of the particularly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” – Mark Twain

Published January 27, 2025 4:20 pm EST

| More on: GWO

Great-West Lifeco (TSX: GWO) has long been a staple on the TSX for dividend-focused investors, and 2025 is no exception. Trading at approximately $46.34 as of writing, GWO stock is hovering close to its 50-day moving average of $47.84, suggesting it is in a period of relative stability. The company, a key player in the insurance and financial services sector, continues to attract attention with its robust performance and dependable dividends. However, whether GWO is a buy, sell, or hold depends on a deeper dive into its recent earnings, valuation metrics, and future outlook.

Into earnings

In its most recent earnings release for Q3 2024, GWO stock reported record base earnings of $1.1 billion, translating to $1.14 per share. This marked a 12% increase from the same period in 2023 and showcased the company’s ability to navigate economic challenges while driving growth. Revenue growth came in at 3.9% year over year, highlighting consistent performance in a competitive industry. However, quarterly earnings growth declined by 4.9% year over year, suggesting some headwinds that may require attention in upcoming quarters.

GWO stock’s valuation metrics paint a mixed picture. Its trailing price-to-earnings (P/E) ratio of 11.6 indicates that it remains reasonably priced compared to broader market benchmarks. Furthermore, its forward P/E ratio of 10 suggests expectations of earnings growth in the coming quarters, thus making it an appealing option for value investors. The company’s price-to-book ratio of 1.7 is also in line with industry norms, reinforcing the idea that the stock isn’t overvalued. Investors seeking consistent income are likely drawn to its forward annual dividend yield of 4.8%. This is slightly above the TSX average and a testament to GWO stock’s shareholder-friendly policies.

From a balance sheet perspective, GWO stock is a fortress. It reported total cash of $178.9 billion at the end of Q3 2024, alongside a manageable total debt of $9.1 billion. With a debt-to-equity ratio of 29.1%, the company demonstrates prudent financial management, ensuring it remains well-positioned to weather any economic uncertainties. Liquidity is also a non-issue, given its impressive current ratio of 35.6. This highlights its ability to meet short-term obligations comfortably.

Buying now

Dividend investors have long been drawn to GWO stock for its reliable payouts. The company’s payout ratio of 56.1% is sustainable, leaving ample room for reinvestment in growth initiatives while still rewarding shareholders. Over the past five years, its average dividend yield has hovered around 5.4%, indicating its commitment to steady distributions. For income-focused investors, this dividend reliability adds a layer of predictability in an otherwise volatile market.

Despite these strengths, there are areas of caution to consider. Insider activity has leaned toward selling rather than buying in recent months, with insiders offloading approximately $8.7 million worth of shares. While insider selling doesn’t always indicate trouble, it does warrant a closer look. Furthermore, analysts are somewhat reserved in their outlook, with GWO stock rated as a “Hold” by consensus. The average price target of $47.75 implies limited upside from current levels, suggesting the stock may be fairly valued at this point.

Foolish takeaway

Looking ahead, Great-West Lifeco’s future prospects hinge on its ability to continue adapting to shifting market conditions. The insurance industry faces challenges such as rising interest rates and evolving customer demands. However, GWO stock’s diverse operations and strategic initiatives, including digital transformations, position it well to capitalize on long-term trends. Moreover, its global footprint allows it to mitigate risks by diversifying across regions.

Ultimately, GWO stock appears to be a solid “Hold” for 2025. Its stable financials, attractive dividend yield, and reasonable valuation make it a reliable option for income-focused investors. However, the limited near-term upside and cautious analyst sentiment suggest it may not be the best choice for those seeking high growth or immediate gains. For existing shareholders, the dividend yield offers a compelling reason to stay invested while keeping an eye on future developments.