Tuesday, October 6, 2009

AGF Management 2

I am continuing my review this stock (TSX- AGF.B) today as I received the November 2008 annual report and I have not reviewed it since I received this report. They have maintained a position on the dividend lists of Dividend Achievers and at Dividend Aristocrats (see indices). (Note the new address for Dividend Achievers list.)

When looking at Insider Buying and Insider Selling, over the past year, there has been net buying. However, all the buying was in the first part of the past year. There has been significant selling in the last part of this past year. I do not take this as a good sign.

This company has not raised their dividends this year. However, because of the rise in dividends for the 2nd payment last year, the dividends actually paid in this current financial year will be over 5% higher. No one expects that this company will do well this year in both earnings and cash flow. This could mean that a very significant amount of their earnings and cash flow will go into paying the dividends.

I calculate P/E based on expected earnings, so I get an expected P/E of over 20 for this year and over 13 for next year. The 5 year average low P/E is 13. This is not particularly low. Sites that use the earnings for the last 12 months to calculate this figure get a P/E of around 45 or 46. This is very high.

If you look at the dividend yield, this is quite high at over 6%. The average yield over the last 5 years is around 3%, so this points to a good price. Also, if you look at the Price/Book Value ratio, the current one is less than 60% of the 10 year average. The last thing to look at is the Graham Price. This price has come down recently because of stagnating Book Value and lack of earnings. The current Graham Price is 10% above the current stock price. What you want is the stock price at or below the Graham Price.

When I look at the Return on Equity, it has been quite good for the financial years of 2007 and 2008. However, so far this year it is just over 6%. This is nothing to write home about. The one good thing is that the Accrual Ratio has come down and for the 3rd quarterly report was at -6%. Anything at -5% and below is very good.

When I look at analysts’ recommendations, the consensus is a Hold. This stock has very little other recommendations, although I did find a Strong Buy and a Buy. However, the overwhelming recommendation is a Hold. (See my site for information on analyst ratings.)

If you look at the charts, you will see that in the very short term of less than 1 year, this stock has done better than the TSX and the Financials Indexes. However, for longer periods of time it has done worse. On long periods like 10 years, it has done almost as well as the TSX, plus it pays dividends. It has had big run ups in the last 2 bull markets, but it has also fallen heavily in the last two bear markets.

At one time people have said you could make more by investing in the stock of Mutual Fund companies, not in mutual funds. However, I sort of wonder about this company. Personally, I am not currently interested in buying its stock, but I will continue to track it. All the ratios are giving mixed signals and certainly, the analysts following this company seem to think it a Hold. However, I have not seen any Sell recommendation.

AGF is a Mutual Fund company. It owns AGF Trust Company. The company has a diversified group of products designed to meet a variety of investment objectives including GICs, term deposits, real estate secured loans, investment loans and home equity lines of credits. They sell their products in Canada. Its web site is www.agf.com. See my spreadsheet at www.spbrunner.com/stocks/agf.htm.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website at www.spbrunner.com/stocks.html for a list of the stocks for which I have put up spreadsheets.

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