AGF Management Ltd 2

I owned this stock (TSX-AGF) at one time. I bought it in 2001 and sold stock in 2006 and 2008. I made a return of just over 2% per year. I sold it because the company was having problems and I could not see that they would get any better anytime soon. This company is on the dividend lists I follow of Dividend Achievers and Dividend Aristocrats (see indices). But note that not all companies on these dividend achievers lists are great investments.

As usual, the first thing I always look at is insider trading, and for this stock over the past year there was some $1.5M selling and just under $.4M of buying. I do not think we learn anything from this report. The selling is less than .2% of this stock’s market capitalization.

Most of the analysts’ recommendations on this stock are a Hold. I also I find Buy and Underperform recommendations and one Sell recommendation. The consensus recommendation would be a Hold. (See my site for information on analyst ratings.) Since I looked at this stock after the November 2009 annual report came in, analysts have been lowering the expected earnings for this company for 2010 and 2011. Analysts also mention that they prefer other Mutual Fund companies to this one.

There is always one analyst that remarks that you can make more money in investing in a Mutual Fund company than investing in Mutual Funds. Also mentioned is the fact that since the 2008 crash, a lot of money is in Money Market Funds and bond funds. This means that a lot of money is sitting on the sidelines because of nervous investors. This sort of thing happens after everyone market crash. Analysts’ also remark that this company is cheap, but not a good buy.

When I look at the P/E ratio, I get a 5 year average low of 11 and a 5 year average high of 20.4. The current P/E ratio, based on earnings estimates is 10.6. I also track the trailing P/E Ratio. A trailing P/E ratio is when you use the current price and last year’s earnings. When I look at the trailing P/E ratio, I get a 5 year average low of 13.3 and a 5 year average high of 22.7. Using the current stock price, I get a Trailing P/E ratio of 13.3. So on this basis, the stock looks cheap. (Note that Trailing P/E ratios tend to be a bit higher than P/E ratios.)

Based on current earning estimates, I get a Graham Price of $19.75. This is also 27% higher than the current stock price of $14.47. In recent years the stock price low have been just over 60% lower than the Graham Price. So, this stock has had recent much lower relative stock prices.

The dividend yield on this stock is also good compared to the past. The current yield is 7.1% and the 5 year average is 4.3%. However, the dividend yield has reached levels over 12% over the past 2 years. I guess the last thing to look at is the Price/Book Value Ratio. The 10 year average is 2.11 and the current P/B ratio is just 1.14. So the current P/B ratio is just over 50% lower than the 10 year average.

So, looking over the pricing ratios that I follow, this stock does look relatively cheap. However, I agree with analysts that think this company is not a good buy. I would like to see it increase its cash flow and revenues before I would even consider buying it again. I would also like to see it pay out a small portion of the cash flow in dividends. If cash flows do not increase, I do not see how it can continue to increase the dividend payments into the future. Currently I am not interested in this stock, but I will continue to follow it.

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. There are multiple voting shares with the major shareholder being the Goldring family. Controlling shareholder is Charles Warren Golding. He has 10.7% of the shares, but has 80% voting control. The class B shares are non-voting. Its web site is here AGF. See my spreadsheet at 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 for stocks followed and investment notes. Follow me on twitter.