Q: Good morning.
What are your thoughts on POW-A these days for an income play. I know there has been little growth in recent years, but at 6+% yield, and a ~7% 5-year dividend growth rate, it does look compelling to me.
Any obvious risks that I might be missing?
Thanks
What are your thoughts on POW-A these days for an income play. I know there has been little growth in recent years, but at 6+% yield, and a ~7% 5-year dividend growth rate, it does look compelling to me.
Any obvious risks that I might be missing?
Thanks
5i Research Answer:
POW is trading quite cheaply, currently trading at 8.2x Forward P/E and 1.1x Price/Book, a pretty meaningful discount compared to insurance peers. The dividend yield is currently around 6% which has been quite stable over they years, given POW’s profitability and book value, the dividend is likely quite secure. Having said that, capital appreciation potentials for POW could still be limited, with nearly no earnings growth expected in the next two years. Margin pressure is probably the biggest potential concern. It is not a stock that would worry us much. It may do better simply as interest rates peak and its yield becomes more attractive. It has had a decent year in 2023 and its last quarter nicely beat estimates.