Canadian investors looking for reliable passive income opportunities could receive reasonably secure quarterly payouts from an underappreciated Power Corporation of Canada (TSX:POW) stock in 2025. While many investors chase the latest tempting trends, sometimes the most promising passive-income prospects hide in plain sight. Power Corporation is one such entity — a Canadian dividend giant that appears to be frequently overlooked yet offers compelling value and a history of richly rewarding shareholders.
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Power Corporation: A look under the hood of this undervalued TSX stock
Power Corporation, founded in 1925, operates as a holding company with significant interests in major financial sector businesses. Its portfolio includes controlling stakes in independent asset manager IGM Financial, insurance conglomerate Great West Lifeco, two privately owned alternative asset managers, and a minority investment in European asset manager GBL, among others. Notably, Great West Lifeco was a major contributor to the company’s earnings in 2024.
This conglomerate structure provides a level of diversification, with operations spanning Canada, the United States, and Europe. Its subsidiaries are actively expanding their wealth management presence, attracting clients across these regions as the number of high-net-worth individuals continues to rise. Power Corporation oversees a substantial amount in total assets under management, exceeding $240 billion.
Despite its scale and profitable operations (net income grew by 22.3% year over year in 2024 to $2.8 billion), Power Corporation’s stock currently trades at a notable conglomerate discount.
The overlooked dividend stock trades at a 22% discount to its net asset value (NAV) of $65.10 per share as of March 19, 2025. This suggests the potential to acquire a quality dividend-paying asset at a discount, making it a potentially undervalued TSX dividend stock.
Why a conglomerate discount? Some investors believe conglomerates duplicate some operating costs and thus run inefficiently. Yet Power Corporation generates healthy margins and is rewarding investors with growing dividends and repurchasing its shares to narrow the discount.
Why the cheap dividend stock appeals to passive-income investors
For income-focused investors, Power Corporation’s dividend track record is particularly attractive. The company pays quarterly dividends, currently yielding 4.8% annually. Management has demonstrated a commitment to increasing shareholder returns, having raised dividends for four consecutive years. This includes a recent 9% increase in March, following strong earnings growth.
Over the past four years, Power Corporation has increased its dividend by a cumulative 36.8% and by 50% since 2019. With a three-year average annual dividend growth rate above 7%, there’s potential for this cheap dividend stock to generate above-average total returns among peers in the S&P/TSX Dividend Aristocrats Index.
Power Corporation has raised dividends for 10 consecutive years now. Its quarterly dividend appears well-supported, with a 51% earnings payout rate.
In addition to dividends, Power Corporation has been actively repurchasing its shares, reducing the number of outstanding shares by almost 4% over the last five years. In 2024 alone, the company repurchased 10.6 million common shares worth $430 million. Share buybacks can increase the value of remaining shares by reducing the total claims on the company’s future earnings and cash flow.
Growth potential beyond passive income
While the POW stock quarterly dividend provides a steady stream of regular passive income, there’s also potential for capital appreciation. The stock currently trades at an appealing forward price-to-earnings (P/E) multiple of nine and a forward P/E-to-growth (PEG) ratio of 1.1, which suggests a reasonable valuation considering its future earnings growth potential.
A historical look shows the potential impact of investing in this dividend giant. A $7,000 investment in Power Corporation stock five years ago, with dividends reinvested, could have more than tripled to $22,300 by today. Year to date, the stock has already delivered a respectable 16.2% total return, as dividends amplify a 14.8% capital gain.
Considering its current cheap valuation, consistent dividend growth, and share-repurchase program, Power Corporation of Canada stock presents a persuasive case for investors seeking both secure income and potential long-term wealth growth. A $7,000 allocation to this overlooked dividend giant could be a strategic move for Canadian investors looking to enhance their retirement accounts’ passive-income streams.
