Friday, February 2, 2018

AGF Management Ltd

Sound bite for Twitter and StockTwits is: Dividend Paying Financial. I think that this stock is cheap. However, there are risks because it is a turn-around situation. There is the possibility that this stock will never be a dividend growth stock again. However, if it can make itself a dividend growth stocks you could get a very nice capital gain from buying it while very cheap. See my spreadsheet on AGF Management Ltd.

I do not own this stock of AGF Management Ltd (TSX-AGF.B, OTC-AGFMF). I used to own this stock. 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.

They waited far too long to cut dividends. As the price got depressed the yield got higher topping out around 12.8%. The current dividend yield is high at 4.22% with the 5 year and 10 year median yield also quite high at 6.94% and 6.90%. The historical median is in the moderate rate at 2.97%.

This stock has not been doing well for some time. I used to own it but started to sell in 2006 and sold all my shares by 2008. I made a total return of 2.08% per year all in dividends. If I had held this stock to today I would have had a loss of some 6.5% per year or some 66% of my investment.

This used to be a dividend growth stock, but has not been one since 2012. They started to cut the dividend in 2015. I have data going back some 25 years and dividends have declined over the past 5 and 10 years at the rate of 21.6% and 8.5% per year. Looking at longer term the dividends have increased over the past 15, 20 and 25 years at the low rates of 1.5%, 6.9% and 6.9% per year. Analysts do not expect any dividend increases over the next couple of year.

They are buying back shares. Shares have been declining since 2012. The shares have been declining by 2.4% and 1.3% per year over the past 5 and 10 years. This means to judge the increase or decrease in things like earnings and revenue, you need to look at Net Income and Revenue and not EPS or Revenue per Share. The Net Income has been declining by 0.15% and 11.6% per year over the past 5 and 10 years. EPS is up by 3.1% and down by 10.6% per year over the past 5 and 10 years.

The whole point here is that when shares are decreasing and investors are using EPS to judge growth they can be misled. You need to reduce the EPS growth by the same rate as decline in shares outstanding.

This used to be a great company. That is why I had shares in it in the past. The worse total return period is for the past 10 years where the total return has declined by 7.04% per year. Other years have a gain with total return for the past 5, 15, 20 and 25 years at 3.57%, 2.06%, 5.53% and 16.01% per year. In most years this is because of dividends.

For all periods but for the 25 year period, the stock price has declined. The stock price has declined over the past 5, 10, 15 and 20 years by 3.78%, 11.92%, 4.17% and 0.56% per year. For the 25 year period the stock price has increase by 6.67% per year. You can see the value of investing in dividend stocks from this.

The 5 year low, median and high median Price/Earnings per Share Ratios are 8.62, 12.67 and 16.72. The 10 year corresponding ratios are 9.54, 13.31 and 16.97. The corresponding historical ratios are 10.21, 15.43 and 18.96. It is not surprising that the historical ratios are higher because of the problems this stock has been in for the last while. The current P/E Ratio is 12.03 based on a stock price of $7.58 and 2018 EPS estimate of $0.63. This stock price testing suggests that the stock price is relatively reasonable and below the median.

I get a Graham Price of $12.96. The 10 year low, median and high median Price/Graham Price Ratios are 0.55, 0.85 and 0.99. These are all quite low. Any P/GP Ratio below 1.00 says that the stock is cheap. The current P/GP Ratio is 0.58. This stock price testing suggests that the stock price is relatively reasonable and below the median.

The 10 year median Price/Book Value per Share Ratio is 1.05. The current P/B Ratio is 0.64 based on Book Value of $937M, Book Value per Share of $11.85 and a stock price of $7.58. The current P/B Ratio is some 39% below the 10 year median. This stock price testing suggests that the stock price is relatively cheap.

When this ratio is lower than 1.00 it means that the stock is selling below the book price and is very cheap. The book value is the theoretical break up price of a stock. So in theory if a stock is selling before the Book Value it is selling below the value of the company.

The historical median dividend yield is 2.97%. The current dividend yield is 4.22% based on dividends of $0.32 and a stock price of $7.58. This current dividend yield is some 42% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively cheap.

When I look at analysts' recommendations I find Buy (3) and Hold (5) recommendations. The consensus would be a Hold recommendation. The 12 month stock price consensus is $8.81 which implies a total return of 20.24% with 4.22% from dividends and 16.23% from capital gains based on a stock price of $7.58.

This article via NASDAQ on Global New Wire talks about AGF buying back shares. Financial News Staff at FLBC News talk about the P/B Ratio being very low. Will Ashworth of Motley Fool likes this stock. See what analysts think of this stock on Stock Chase. Mostly they see the company as a turn-around situation.

AGF Management Ltd is an asset management company that provides investment management for mutual funds, institutions and corporations, as well as net-worth clients. It has operations in Canada, the United States, the United Kingdom, Ireland, and Asia. Its web site is here AGF Management Ltd.

The last stock I wrote about was about was Shaw Communications Inc. (TSX-SJR.B, NYSE-SJR)... learn more. The next stock I will write about will be Exco Technologies Ltd. (TSX-XTC, OTC-EXCOF)... learn more on Monday, February 5, 2018 around 5 pm.

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. I have three blogs. The first talks only about specific stocks and is called Investment Talk. The second one contains information on mostly investing and is called Investing Economics Mostly. My last blog is for my book reviews and it is called Non-Fiction Mostly. Follow me on Twitter or StockTwits. I am on Instagram. Or you can just Google #walktoronto spbrunner8166 to see my pictures.

No comments:

Post a Comment