Great West Lifeco Deserves A Look From Dividend Investors

Insurance and wealth-management company Great-West Lifeco Inc. recently reported that its second-quarter profit more than doubled due to a large gain connected to the sale of its U.S. health care business.

Even without the gain, Great-West’s results exceeded expectations set by the street. Most importantly for us dividend growth investors, Great West Lifeco managed to raise its dividend by 5 per cent to 30.75 cents a share in spite of a tough financial environment.  The inherent profitability, due to more conservative and principal guaranteed investments, is one of the reasons that I was touting insurance companies back at the beginning of the “Bank meltdown”.

Following the announcement, the company’s shares increased by 3.1 per cent to $29.82 on the Toronto Stock Exchange later in the session .

Financial Highlights

Net income in the April-June quarter was $1.21-billion, or $1.36 a share, the company said. That was up from $544-million, or 61 cents a share, in the same 2007 period.

Excluding the $649-million gain on the U.S. health care business, adjusted net income was $564-million, or 63 cents a share, up 4 per cent from a year earlier.

Analysts expected that the company would announce a profit of 61 cents a share, at least  according to the estimates by Reuters.

In its Canadian business alone, the net income increased 7 per cent to $275-million.

With a Dividend yield of 3.94% and a Beta of just 0.47, Great West Lifeco could be an investors dream stock in a rocky market.

Couple those two statistics with an average dividend growth rate of 17.5% over the last 5 years and a payout ratio of less than 50% and we have a fantastic candidate for a long-term dividend growth portfolio.

Company Quick Facts

Great-West has various insurance and asset-management companies in Canada, the United States, Europe and Asia and is a is a financial services holding company with interests in the life insurance, health insurance, retirement savings, investment management and reinsurance businesses.

Great-West is controlled by Power Financial Corp., a Montreal-based financial holding company that is also one of my favorite non-bank Canadian dividend stocks.