I understand the impact of low interest rates on the Lifecos but at a safe 6.3 per cent current yield does Great West Life look good?
Great West Lifeco Inc. and all the life insurance companies have had to deal with a less than robust return on their investments. Equity markets have been a challenge and interest rates have been paltry at best. I want to caution you on your use of the word safe when it comes to dividends. Dividends are issued at the discretion of the board of directors based on profitability and other factors. They are not guaranteed.
When conditions demand, boards have been known to cut and even eliminate dividends. Let's make sure we don't get lulled into a false sense of security by framing dividends as sacrosanct. Having said that, let's run the charts and see where GWO stands.
The three-year chart illustrates a stock that broke support in June of 2011 and had a death cross surface in July. Currently the shares are trying to hold onto support at $19.50.
The six-month chart provides a better look at the most recent trading action in GWO. The MACD and RSI both signalled the move off of $19.50 in mid September. The shares then advanced to $22.50 for a 15.38 per cent gain. The momentum indicators then signalled a shift to the sell side as the stock met resistance and then retested $19.50.
Currently the MACD and RSI are generating another buy signal. At this point it looks like you can catch a run off of these levels. But keep in mind that the overall trend is down and the next significant event will be the fourth-quarter release in February. Trade this one for income and don't look for a return to a buy and hold strategy. That may have worked in the past but those days are gone for now.
Make it a profitable day and happy capitalism!
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