Wednesday, August 22, 2012

AGF Management Ltd

On my other blog are some comments about "Dividend yields on Original Investments". See comments blog.

I do not own this stock of AGF Management Ltd. (TSX-AGF.B), but I used to. I bought this stock in 2001 and sold it off in 2006 and 2008. I made over this period of 7 years some 2.08% per year return. All the return was dividends. I made nothing in capital gains. I sold the stock because I did not think that the stock was going anywhere. From when I sold in 2006 to 2008, the stock did recover a bit.

The other thing I did not like about the stock was that they were continuing to raise the dividends at the expense of Dividend Payout Ratios. The DPRs were quite low when I first bought this stock, but they have been steadily rising. The ones for the financial year ending in November 2011 the DPRs were 90% for earnings and 58% for cash flow. The DPR for earnings for 2012 is expected to be above 100%.

Looking at my spreadsheet, the really only bright spot is the growth in dividends which run at 9% and 17% over the past 5 and 10 years. However, they are been slowing down lately with the last two increases being at 3% and 2.9%. The other growth that is not awful is that for book value per shares and this has grown at 3.9% and 4.5% per year over the past 5 and 10 years.

Total return is not growing and this stock has had the total return go down 4% per year over the past 5 years. Total return is 0% per year over the past 10 years. Dividend income was at 4.6% per year and 3.6% per year over the past 5 and 10 years. Capital gains were a negative 9.3% and 3.7% per year over the past 5 and 10 years.

Although the company has not had any years of negative earnings or cash flow, they also have not been able to growth their earnings or cash flow. They also are not growing their revenue. The revenue has had 0% growth over the past 5 and 10 years. Revenue per share has declined by 2% per year over the past 5 years and has had 0% growth over the past 10 years.

Earnings per Share have declined 1% per year and 4% per year over the past 5 and 10 years. Cash Flow per Shares has declined 1% and 3% per year over the past 5 and 10 years.

The Return on Equity Ratios looks very good on this stock, with the ROE for the financial year ending in November 2011 at 17.8%. However, the ROE based on the Comprehensive is a lot lower at 8.3%. Usually this happens when the quality of the earnings are not as good as they might appear. You expect some variance, but not so much.

The current Liquidity Ratios at 1.12, although not a great ratio, is higher than it has been for a while. Mostly, the Liquidity Ratio is below 1.00 (5 and 10 year median ratios are 0.66 and 0.70). With this ratio under 1.00 it means that the current assets cannot cover the current debts. The other thing to point out that is that if you include cash flow exclusive of dividends, it does not raise the ratio above 1.00.

The current Debt Ratio is rather low also with a current value of 1.32. This ratio also has a tendency to be low and the 5 and 10 year median ratios are at 1.25 and 1.33. This is ok, but what you want is a ratio of 1.50 or above.

The current Leverage and Debt/Equity Ratios are a little high at 4.12 and 3.12. With these ratios lower is much better.

I still do not like this stock as an investment and I am glad that I sold when I did.

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.