Tuesday, May 28, 2013

Ag Growth International

I own this stock of Ag Growth International (TSX-AFN, OTC-AGGZF). I bought this stock in October and December of 2011. Since then the stock has gone down and my total return is some 0.68%, with a capital loss of 6.18% and dividends of 6.86%. This is quite different from last May when I reported on this stock. At that time the stock was up considerably. This stock is connected with agriculture, so I would expect the earnings and cash flows to be volatile. This is another stock that was an income trust and has converted to a corporation.

Until 2011, this stock has a fairly good record of dividend increases. It has not raised dividend since 2011, but interestingly, it is still on the Dividend Aristocrats Index. The 5 and 10 year growth in dividends is at 7.4% and 15% per year, respectively. I expect that dividend growth will moderate now that this company is a corporation.

The 5 year median Dividend Payout Ratios for Earnings and Cash Flow is 123% and 64%. The values for 2012 were 175% and 87%. The expected DPRs for 2013 are 118% and 77%. This explains the lack of dividend increases lately.

I think that you can expect to earn money on this stock over the longer term, but I expect short term volatility. The total returns over the past 5 and 10 years have been 5.77% and 24.47% per year. The dividend portion of this return was at 6.75% and 11.18% per year over the past 5 and 10 years. The capital loss over the past 5 years was 0.98% and the capital gain over the past 10 years 13.29%.

The outstanding shares have decreased by 0.54% per year over the past 5 years. The outstanding shares have increased by 3% per year over the past 10 years. The shares have increased due to Debenture conversions, Stock Options and share issues. They have decreased due to buy backs.

Revenue has been increasing quite nicely under this company. Revenues are up by 19% per year over the past 5 and 10 years. Revenue per share is up by 20% and 16% per year over the past 5 and 10 years.

The growth of Earnings per Share is not as good as revenue, with growth in EPS at 5.3% and 1.5% per year over the past 5 and 10 years. However, looking at 5 year running averages, the growth in EPS over the past 4 years is 11% per year. Since accounting published only goes back to 2004, I have no 5 year running averages longer than 4 years.

The growth in Cash Flow per Share is also not as good as revenue, with 5 and 10 years growth at 5.3% and 3.9% per year. The 5 year running average growth over the past 4 years is also better than the 5 year growth, with growth at 13.9% per year.

The Return on Equity is fine at 9.3% for 2012. However, the 5 year median is better at 17.1%. The ROE on comprehensive income is similar in 2012 at 8.9%. The difference between net income and comprehensive income can vary a lot for this company.

The debt ratios on this company can be quite good. The current Liquidity Ratio is 3.42. The Debt Ratio at 1.97 is not quite as strong, but it is high. The current Leverage and Debt/Equity Ratios are fine at 2.09 and 1.06.

As I said previously, this company has connection with agriculture, so it will have volatility in earnings and cash flow. I expect to earn money on this company over the longer term. The current dividend yield is relatively high at 6.89% and I would expect that it was come down to between 4 and 5% in the future. See my spreadsheet at hse.htm.

Ag Growth is a leading North American manufacturer of portable grain handling equipment, consisting of augers, belt conveyors, grain drying, fencing, post-hole augers, and other ancillary grain handling accessories. This company has 1,400 dealers and distributors in Canada and the United States. Its web site is here Ag Growth.

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 or StockTwits.

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