Wednesday, February 4, 2015

AGF Management Ltd.

On my other blog I am today writing about possible cheap dividend stocks for February 2015 continue...

I do not own this stock of AGF Management Ltd. (TSX-AGF.B, OTC-AGFMF), but I used to. I bought it in 2001 and sold half in 2006 and the rest in 2008. It used to be a dividend growth stock, but has not been one for some time now. I sold because I did not see that the stock would improve. It was raising dividends still but at the expense of DPR. In 2008 I was lucky that I sold before it crashed. It has yet to recover.

This stock I used to consider to be considered a dividend growth stock. I sold in 2008 because it kept raising its dividend at the expense of the Dividend Payout Ratios. The company finally stopped raising their dividends in 2013. That year the DPR for EPS was 432% and for CFPS 82%. In 2014 for DPR for EPS was at 154% and for CFPS was at 162%.

* * I missed that they are cutting the dividend by 70%. It is about time. However, they plan to buy back stock. I do not think this is better.

I think that prudent management stops raising the dividends when they can no longer afford to raise them. I know that companies that do stop raising their dividends get dumped in the stock market. However, good companies act in prudent ways.

This company was fooling no one. The company historically had dividend yield in the 2 to 3%, although it did also go below 1% and above 4% at different times. Now the dividend yield is at 13.17% and in the past year hit a high of 15.5%.

As I have mentioned before, I color code the growth in Revenue, Earnings and Cash Flow on my spreadsheet. For this company all I see is red. For Revenue per Share, growth is down by 3.8% and 2.6% per year over the past 5 and 10 years. For EPS, growth is down by 8.5% and 1.8% per year over the past 5 and 10 years. For CFPS, growth is down by 22.1% and 11.6% per year over the past 5 and 10 years.

Is there any sign of improvement? Well, Revenue and Revenue per share has been declining for the past 3 years and is expected to decline again in 2015, but improve a bit in 2016. EPS was fairly good last year and was an improvement after 3 years of decline. However, EPS is expected to be lower in 2015 and 2016. CFPS has decline for the last 4 years. There is expected to be an improvement in 2015.

Do not forget that expected improvements are all to do with estimates for 2015. Estimates are just that, estimates. In 2014 the estimate for Revenue was $463 and Revenue was $464. In 2014 the estimate for EPS was $0.53 and EPS was $0.70. In 2014 the estimate for CFPS was $1.37 and CFPS was $0.66.

The Return on Equity was generally between 13% and 20% prior to 2008. It has only broke 10% once since then. The ROE for 2014 was 6.6% with a 5 year median also of 6.6%. For 2014 the comprehensive income ROE was 7% with a 5 year median of 7%. The ROE on comprehensive income has been better or worse than the ROE on net income with a 5 year variance of just 0.1%.

For the last 2 years the debt ratios have been very good. The Liquidity Ratio for 2014 was 3.63, the Debt Ratio was 2.60 and the Leverage and Debt/Equity Ratios were 1.63 and 0.63. However, these ratios were not good prior to 3 year ago. In 2011 the Liquidity Ratio was 0.67 (with cash flow after dividend added it, it was just 0.71). The Debt Ratio in 2011 was 1.32 and the Leverage and Debt/Equity Ratios were 4.12 and 3.12.

Sound bite for Twitter and StockTwits is: Still not doing well. Maybe if they had made better decision in the past, the company would be in better shape today. I know people who live off their dividends like I do, do punish companies that cut dividends. However, living off my dividends I can better afford a cut dividend that a company bankruptcy, but I do think that this company will recover eventually. See my spreadsheet at agf.htm.

This is the first of two parts. The second part will be posted on Thursday, February 5, 2015 and will be available here. The first part talks about the stock and the second part talks about the stock price.

AGF Management Limited is an integrated, global wealth management company, whose principal subsidiaries provide investment management for mutual funds, institutions and corporations, as well as high-net-worth clients; and trust products and services. They sell their products in Canada. Its web site is here AGF Management.

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. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.

See my website for stocks followed and investment notes. Follow me on Twitter or StockTwits.

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