I own this stock of Ag Growth International (TSX-AFN, OTC-AGGZF). This is an income trust that did not cut the dividends. They are paying too high of a dividend compared to earnings, even if you just take into consideration dividends paid in cash. They cannot increase their dividends until the Dividend Payout Ratio gets better. Dividend yield is still quite high at over 4%.
When I was updating my spreadsheet, I noticed that they sales are growing well, but they had a bad earnings year in 2018. The analysts expected $2.90 in EPS but EPS was just $1.56. Analysts expect EPS to be better this year at $3.30. For this company EPS tend to go up and down a lot.
Dividend yields are in the high end of the moderate range and into the good range. The current dividend is 4.41% with 5, 10 and historical yields at 4.83%, $5.69% and 6.40%. This company changed to a corporation in 2009 and since then the median yield has been 5.60%.
This company did not decrease the dividends when it became a corporation. It has not increased the dividends since 2011 because it is still paying out too much in the way of dividends compared to its earnings and cash flow.
The Dividend Payout Ratios are too high. The DPR for EPS for 2018 is 154% and 5 year coverage at 340%. The DPR for CFPS for 2018 is 37% with 5 year coverage at 52%. Some analysts are still looking at FFO for funding and in fact the company says that the dividends are funded from cash form operations. The DPR for FFO for 2018 is 42% with 5 year coverage at 57%.
Debt Ratios are fine. The Long Term Debt/Market Cap Ratio is fine at 0.32. The Liquidity Ratio is good at 1.71 for 2018 with 5 year median at 1.58. The Debt Ratio is fine at 1.54 with 5 year coverage at 1.47. The Leverage and Debt/Equity Ratios are normal at 2.84 and 1.84 respectively and with 5 year median values at 2.45 and 1.45.
The Total Return per year is shown below for years of 5 to 15 to the end of 2018. Under the Capital Gain column is the portion of the Total Return attributable to capital gains. Under the Dividend column is the portion of the Total Return attributable to dividends. See charts below.
I have done well with this stock. I have had it for 7.5 years and have a total return of 13.04% per year with 7.12% from capital gains and 5.92% from dividends.
| From | Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|---|
| 2013 | 5 | 0.00% | 6.23% | 0.95% | 5.28% |
| 2008 | 10 | 2.75% | 19.34% | 10.18% | 9.15% |
| 2003 | 15 | 8.35% | 21.68% | 10.69% | 10.99% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 22.79, 31.76 and 41.02. The corresponding 10 year ratios are 18.21, 23.29 and 27.78. The corresponding historical ratios are 14.34, 21.29 and 25.65. When a company is going through a difficult time, the P/E Ratios will only adjust so far. This is the reason for the relatively high P/E Ratio over the past 5 years. The current P/E Ratio is 16.50 based on a stock price of $45.46 and 2019 EPS estimate of $3.30. This stock price testing suggests that the stock price is relatively cheap.
I get a Graham Price of $40.92. The 10 year low, median, and high median Price/Graham Price Ratios are 1.27, 1.75 and 2.06. The current P/GP Ratio is 1.33 based on a stock price of $54.46. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a 10 year median Price/Book Value per Share Ratio of 2.58. The current P/B Ratio is 2.41 based on Book Value of $414M, Book Value per Share of $22.55 and a stock price of $54.46. The current ratio is 6% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get an historical median dividend yield of 6.40% and a median dividend yield of $5.60% from 2009. The current dividend yield is 4.41% based on a stock price of $54.46 and dividends of $2.40. The current yield is 31% and 21% below the above median yields. This stock price testing suggests that the stock price is relatively expensive.
The 10 year median Price/Sales (Revenue) Ratio is 1.39. The current P/S Ratio is 0.93 based on 2019 Revenue estimate of $1,075M, Revenue per Share of $58.34 and a stock price of $54.46. The current ratio is some 33% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
Results of stock price testing is that the stock price is relatively cheap to reasonable. The best test is as usual the P/S Ratio test. Revenue counts a lot in the future earnings and cash flow of a stock. The P/B Ratio is a good one and it shows the stock price is reasonable. The Graham Price test does the same. The dividend yield testing is not good as this stock used to be an income trust. Income trust had much higher yields that corporations. The P/E Ratios are all over the place and too high and so that is not a good test.
When I look at analysts’ recommendations, I find Strong Buy (1) and Buy (7). The consensus would be a Buy. The 12 month stock price consensus is $72.63. This implies a total return of 37.77% with 3.36% from capital gains and 4.41% from dividends.
See what analysts are saying on Stock Chase. They are mostly cautious because it is a small cap. Ryan Vanzo on Motley Fool says some good things about this company. A writer in Simply Wall Streetsays the company is highly leverage because total debt exceeds equity. This is not a ratio I look at. Erica Schwartz on Dispatch Tribunal talks about recent analysts rating. Note the $0.27 EPS for the first quarter is the adjusted EPS, that is EPS without special income or charges. Stephen Takacsy on BNN Business discusses the company.
Ag Growth International Inc manufactures portable and stationary grain handling, storage and conditioning equipment, including augers, belt conveyors, grain storage bins, grain handling accessories, grain aeration equipment and grain drying systems. The company operates mainly in Portable handling, permanent handling, storage and conditioning, livestock, and manufacturing sectors. Its web site is here Ag Growth International.
The last stock I wrote about was about was Power Financial Corp (TSX-PWF, OTC-POFNF) ... learn more. The next stock I will write about will be Canadian Utilities Ltd (TSX-CU, OTC-CDUAF) ... learn more on Monday, May 13, 2019 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.
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