Great-West Lifeco (GWO) has demonstrated robust financial performance, highlighted by a significant increase in earnings per share (EPS) during the third quarter. The company's strategic capital allocation, including substantial share buybacks and consistent dividend growth, positions it as an attractive investment, particularly for those interested in preferred stock options. The preferred dividends exhibit strong coverage, underscoring the company's financial stability and commitment to shareholder returns.
In the third quarter, Great-West Lifeco achieved record results, with EPS soaring by 30% compared to the previous year. This impressive growth was primarily driven by strong base earnings, indicating healthy operational performance across its divisions. This financial strength provides a solid foundation for the company's dividend policies and overall stability.
A key highlight for investors is the security of GWO's preferred stock dividends. These dividends require less than 4% of the company's attributable net profit, a remarkably low figure that speaks to the extensive coverage and safety provided to preferred shareholders. Furthermore, this is bolstered by a substantial equity cushion of C$25.5 billion, which acts as a significant buffer junior to preferred shares, further enhancing their reliability.
For instance, preferred shares like GWO.PR.Q:CA offer an attractive yield of 5.5%. Even considering the risk of a call, the total estimated annual return remains close to 8%. This makes preferred shares a compelling option for income-focused investors seeking stable returns with mitigated risks. The company's consistent performance and robust financial health underpin the appeal of these fixed-income instruments.
Beyond preferred shares, GWO's common shares are also gaining traction among long-term investors. Despite trading at a mid-teen earnings multiple, the company's aggressive share buyback program and a history of increasing dividends make them increasingly attractive. These capital allocation strategies reflect management's confidence in future growth and its dedication to enhancing shareholder value. Analysts project EPS to reach approximately C$5 in fiscal year 2025 and C$5.30–5.40 by fiscal year 2027, with the stock currently valued at 13 times current earnings and 12 times forward earnings. Such projections, combined with ongoing buybacks and dividend increases, suggest a promising outlook for common shareholders.
Great-West Lifeco's recent financial outcomes underscore a powerful blend of strong operational achievements and prudent capital management. Both its preferred and common shares present compelling opportunities, with preferred stock offering secure, attractive yields and common stock holding the potential for significant long-term growth through earnings expansion and shareholder-friendly policies.