Great-West Lifeco: Buy, Sell, or Hold in 2025?

GWO stock has been one of the best dividend stocks out there for income and returns, but is that still the case?

Amy Legate-Wolfe ❯

Amy became interested in investing in 2018 after having her first daughter. After receiving a masters degree in journalism from Western University, she became frustrated that the finance industry remained a confusing place for Canadians like her: new parents, millennials, and other young people who needed to understand their finances. Now, Amy focuses on tech companies and renewable energy for growth opportunities, coupling that with long-term investing strategies and equities. She also provides investors with a daily newsletter, Canada Stock Digest, for daily market updates. Before joining Motley Fool Canada, she wrote for major news organizations including HuffPost, CTVNews.ca, and CBC. When she’s not researching investing strategies, Amy’s time is pretty much monopolized by her two wild daughters, but in what little spare time she has she loves to do yoga, go on walks with her dog, and travel with her husband. Follow Amy on LinkedIn and Canada Stock Digest.

Published February 26, 8:45 pm EST

Great-West Lifeco (TSX:GWO) has been a staple in many Canadian investment portfolios for years, and it is known for its steady dividends and reliable growth. As we move further into 2025, the question arises: is this insurance and wealth management giant a buy, sell, or hold? Recent earnings, market trends, and the dividend stock’s long-term outlook paint an interesting picture for investors considering their next move.

The numbers

The dividend stock’s fourth-quarter earnings report for 2024 showcased another strong performance. Great-West Lifeco reported base earnings of $1.1 billion, translating to $1.20 per share, marking a 15% increase from the same period last year. This was the sixth consecutive quarter of record base earnings — a testament to the company’s ability to navigate challenging market conditions while continuing to expand its core businesses.

Return on equity (ROE), a crucial measure of profitability, reached 17.5%, up nearly a full percentage point from the previous year. This suggests Great-West Lifeco is generating strong returns from its shareholders’ equity. Therefore, it is an encouraging sign for those considering a long-term hold. The dividend stock’s book value per share also increased by 12%, further solidifying its financial strength. This growth in book value reflects an expanding asset base and a disciplined approach to capital management.

In line with its earnings growth, Great-West Lifeco announced a 10% increase in its quarterly dividend, raising it to $0.61 per share. This move reinforces the dividend stock’s commitment to rewarding shareholders and highlights its confidence in future cash flow generation. For income-focused investors, this higher payout is an attractive feature, particularly when combined with the stock’s forward annual dividend yield of 4.68%. On top of the dividend increase, the company plans to repurchase up to $500 million worth of shares under its current Normal Course Issuer Bid (NCIB), demonstrating further confidence in its financial position and growth prospects.

Considerations

However, not everything was flawless. The dividend stocks Life Insurance Capital Adequacy Test (LICAT) ratio, which measures an insurer’s capital strength, dipped slightly to 130%, down from 134% in the previous quarter. While still comfortably above regulatory requirements, this slight decline suggests the company is balancing capital returns with growth initiatives. It’s not necessarily a red flag, but it’s worth monitoring in future quarters to ensure the company maintains its strong financial footing.

The dividend stock’s trailing price-to-earnings (P/E) ratio sits at 12.14, while the forward P/E is 10.72, indicating that the market has already priced in much of the expected growth. Still, given the company’s track record, the current valuation seems fair rather than stretched.

From a balance sheet perspective, Great-West Lifeco remains well-positioned, with $183.79 billion in cash and cash equivalents as of the most recent quarter. This ample liquidity ensures the company can weather economic uncertainties while continuing to invest in growth opportunities. Total debt stands at $14.36 billion, resulting in a debt-to-equity ratio of 43.97%.

Bottom line

Looking ahead, Great-West Lifeco’s diversified operations across Canada, the United States, and Europe position it well to navigate varying economic conditions. The dividend stock’s continued expansion in the U.S. retirement services market is particularly promising, as it taps into a growing need for retirement planning and wealth management. Moreover, the company’s emphasis on digital transformation and efficiency improvements should support future profitability.

For investors considering their next move, Great-West Lifeco appears to be a solid hold. The company’s strong earnings, consistent dividend growth, and stable financial position make it a reliable choice for long-term portfolios. While the current valuation suggests limited short-term upside, the dividend stock’s steady income stream and growth prospects make it worth keeping. If you’re looking for a dependable stock with a healthy dividend and moderate growth potential, Great-West Lifeco remains a compelling option for 2025 and beyond.