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BMO raises Great-West Lifeco stock PT, highlights 5.3% dividend yield

Published 2024-05-03, 10:54 a/m

On Friday, BMO (TSX:BMO) Capital Markets adjusted its price target for Great-West Lifeco Inc (TSX:GWO:CN) (OTC: GWLIF), increasing it to Cdn$45.00, up from the previous Cdn$44.00, while maintaining a Market Perform rating on the stock. The modification follows Great-West Lifeco's first-quarter performance, which surpassed expectations with a Base EPS of $1.09, compared to the anticipated $1.01/$1.02 by analysts.

The earnings beat was partially due to a lower tax rate, which contributed $0.04 to the EPS and is considered non-repeatable. However, the remainder of the outperformance was driven by more robust investment income, improved fee and spread income, and reduced operating expenses.

These positive factors were somewhat mitigated by less favorable results in the company's Empower business, which faced lower revenue, increased operating expenses, weaker flows, and a decline in ending assets.

The BMO Capital Markets analyst cited concerns over potential earnings visibility challenges within Great-West Lifeco's more opaque divisions, such as Empower, Europe, and Capital & Risk Solutions.

Despite these reservations, the firm recognizes the attractiveness of the company's 5.3% dividend yield. Additionally, the valuation of the stock at 9.4 times the next twelve months' (NTM) base EPS presents a favorable comparison to the 10.3 times average since the Global Financial Crisis (GFC), offering a degree of financial support for the stock’s outlook.

InvestingPro Insights

Following the recent update by BMO Capital Markets on Great-West Lifeco Inc, InvestingPro provides additional insights that could further inform investors about the company's financial health and market position. With a market capitalization of $28.74 billion and a P/E ratio of 12.67, the company appears to be valued reasonably in the market. Notably, the adjusted P/E ratio for the last twelve months as of Q1 2024 stands at 11.22, which suggests that the company is trading at a low price relative to its near-term earnings growth.

InvestingPro Tips indicate that Great-West Lifeco has a history of consistent dividend payments, having raised its dividend for 9 consecutive years and maintained payments for 39 consecutive years. This consistency is a testament to the company's financial stability and commitment to shareholder returns. Additionally, analysts predict that Great-West Lifeco will continue to be profitable this year, with sales growth anticipated in the current year, further reinforcing the company's strong market position as a prominent player in the Insurance industry.

When considering the company's financial metrics, the dividend yield stands at 5.32%, aligning closely with the attractive yield cited by BMO Capital Markets. The revenue growth for the last quarter of Q1 2024 was positive at 2.69%, which may indicate the company's ability to grow despite market challenges. Furthermore, with liquid assets exceeding short-term obligations, Great-West Lifeco exhibits financial resilience and liquidity.

For investors looking to delve deeper into Great-West Lifeco's financials and market potential, InvestingPro offers additional insights. There are 6 more InvestingPro Tips available for Great-West Lifeco, which can be accessed at https://www.investing.com/pro/GWO. These tips could provide valuable perspectives on the company's future performance and market dynamics. To access these insights, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, enriching your investment research with comprehensive data and expert analysis.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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