I do not own this stock (TSX-AGF.B). I used to own this company. I bought it over several months in 2001 and sold some in 2006 and the rest in 2008. I made a return of 2% per year on this stock. I sold because I did not think that it was going anywhere.
It was probably a good idea as I sold at an average price of $22.83 a share in 2006/8 and currently the stock is worth $15.97 a share. However, it is still quite liked by a number of analysts. It is true that the dividend has been rising every year, but this is at the expense of the Dividend Payout Ratios. I do not think that this stock has recovered from the 2000 bear market, let alone the most recent one of 2008.
The DPR for earnings used to be around 20% and the one for cash flow around 8%. The current DPR is 79% for earnings and 51% for cash flow. The 5 year average DRP is 67% for earnings and 28% for cash flow. The dividend increases have really been slowing lately. The 5 year median increase is 13%, but the last 2 years of increases before the end of 2010 was 3% and 2.9%. The most recent increase for 2011 was 2.9%. The other thing that is noticeable is that the yield has been increasing. It used to be around 1% and it is currently at 6.6%.
The only items that have been really increasing over the past 5 and 10 years are the earnings and book value. Earnings have increased over the past 5 and 10 years at 5.2% and 2% per year, respectively. Book value over the past 5 and 10 years has increased at 4.8% and 8.4% per year respectively.
Revenues have only marginally been increasing at around 1% per year. Over the 5 and 10 years prior to 2010 no one would have made any money or only a marginal amount on this stock even though the dividend portion of total return has been 4.5% and 3% per year, respectively. Cash flow has not grown over the past 5 and 10 years.
However, analysts expect growth in both earnings and revenues this year and maybe some growth in cash flow. However, analysts’ consensus estimates for such things are notorious for being wrong.
Return on Equity for this stock has been fine. The currently 5 year median ROE is 13.8% and the ROE for the financial year ending in 2010 was 20.3%. The ROE for the last 12 months ending in May 2011 was also good at 18.7%.
On the debt ratio side, the Liquidity and Asset/Liability Ratios have always been low, especially the Liquidity Ratio. At the end of 2010, the Liquidity Ratio was 0.72 and the Asset/Liability Ratio was 1.28. Nothing much has changed at the end of the 2nd quarter of May 2011. The Liquidity Ratio was 0.70 and the Asset/Liability Ratio was 1.32.
For my other debt ratios, they are a bit high with the current Asset/Book Value Ratio at 4.11 and the Debt/Equity Ratio at 3.57. These are a bit better than the ones for the end of 2010 which were 4.57 and 3.57, respectively. (See my site for further information on Debt Ratios.)
Personally, I still think that this stock is going nowhere, however, tomorrow I will review what analysts say about the stock and my spreadsheet says about its current price.
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 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.
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