Look beyond the banks for reliable dividends

Great-West LISTEN:  

GREAT-WEST LIFECO INC. $28 (Toronto symbol GWO; Conservative Growth Payer Portfolio, Finance sector; shares outstanding: 988.4 million; Market cap: $27.7 billion; Dividend yield: 5.6%; Dividend Sustainability Rating: Above Average; www.greatwestlifeco.com) is Canada’s second-largest insurance company, after Manulife Financial. It also offers mutual funds and wealth management services. Power Financial Corp. (Toronto symbol PWF) owns 67.7% of the company.

With the March 2018 payment, the company raised its quarterly dividend by 6.0%, to $0.389 a share from $0.367. The new annual rate of $1.56 yields a high 5.6%.

In the past few years, Great-West has used acquisitions to expand, particularly in Ireland. Recent purchases in that country include Aviva Health and the 51% of GloHealth that Great-West didn’t already own.

The company also purchased an undisclosed stake in the Irish operations of Invesco Ltd. (New York symbol IVZ). That business manages the pension plans of 275 of Ireland’s large corporations and over 500 of its smaller companies.

Great-West also paid an undisclosed amount for U.S.-based EverWest Real Estate Partnership LLC. That firm’s $2 billion portfolio includes office, industrial and multi-residential buildings.

In the three months ended September 30, 2018, Great-West’s revenue increased 16.6%, to $34.4 billion from $29.5 billion a year earlier. Sales were higher as a result of strong growth for both of its Putnam Investments unit, in the U.S. and in Europe.

Earnings in the quarter rose 28.0%, to $745.0 million from $582.0 million. Earnings per share increased by 34.1%, to $0.75 from $0.59.

The company ended the third quarter with $1.44 trillion in assets under administration, 11.4% higher than a year earlier.

The stock trades at a low 9.4 times the $2.98 a share that Great-West will probably earn in 2018. That partly reflects the fact that acquisitions are always uncertain and often take longer to pay off than expected.

Great-West Lifeco is still a hold.

IGM FINANCIAL INC. $33 (Toronto symbol IGM; Conservative-Growth Payer Portfolio, Finance sector; Shares outstanding: 240.9 million; Market cap: $7.9 billion; Dividend yield: 6.8%; Dividend Sustainability Rating: Above Average; www.igmfinancial.com) is Canada’s largest independent mutual-fund provider with $159.7 billion in assets under management as of September 30, 2018. Power Financial owns 61.4% of IGM.

The company has two main businesses: Mackenzie Financial sells funds and ETFs through independent brokers; and Investors Group offers mutual funds and other services, such as portfolio management, through 3,945 affiliated advisors.

IGM last raised its quarterly dividend by 4.7% in January 2015. Investors receive $0.5625 per share for an annual rate of $2.25. That yields a high 6.8%.

In the third quarter ended September 30, 2018, IGM’s revenue rose 7.6%, to $832.0 million from $773.3 million a year earlier. Excluding one-time items, overall earnings jumped 28.4%, to $222.7 million from $173.4 million. Earnings per share increased 27.8%, to $0.92 from $0.72.

The company recently acquired 13.9% of China Asset Management Co., Ltd. (China AMC), one of that country’s largest mutual fund sellers. It paid $638.3 million for that stake, and at the end of the third quarter, the investment was valued at $641.3 million.

IGM will probably earn $3.35 a share for all of 2018, and the stock trades at just 9.9 times that forecast.

IGM Financial is a buy.


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