AGF Management Ltd

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. Still, I sold at a better price that I could get today. It seems to me that this company did not recover well from the last recession and then it got hit with the current one. Since it is a Mutual Fund company, you would expect a recession to hit it hard, but you also expect to see it recover when a recession is over.

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. To continue to increase their dividends, this company is paying a higher and higher proportion of their cash flow. It is now approaching almost 50% of the cash flow. I do not think this is a good idea. They might have been better off maintaining the dividend or decreasing it and getting the company into a better shape.

The company’s year end is in November, and if you use their year end stock prices, the total return on this company is just over 6% per year for the past 5 and 10 years. Of this total return, dividend payments have produced almost 5% per year of the return over the last 5 years and about 3% per year of the return over the last 10 years. Considering this company is probably a medium risk to high risk, this is not very good. Also, the current stock price is back to what it was in 1999.

The other thing I do not like is that the cash flow fluctuations around, but has not really grown over the last 10 years. The Revenues also have not grown much over the past 10 years. The 5 and 10 year growth figures are -1.4% per year and 3.7% per year, respectively. Their Liquidity and Asset/Liability Ratios are low, but they have no trouble getting loans.

Probably the best thing you can say about this stock is that over the past 5 and 10 years the dividends have been increasing at the rate of 20% per year. My problem is that I do not think this is sustainable unless they start to earn some money. I know that their earnings grew over the last 5 and 10 year periods at the rate of 5% per year and 3.7% per year respectively. However, I like looking at cash flow because I feel you can judge the profitability of a company better using cash flows than using earnings.

This is obviously not a very upbeat report on this company. On Monday, I will look at what the analysts say about 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.