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.
According to my calculations when I sold this off, I had a total return of 2.08% per year with -0.01% from capital loss and 2.09% from dividends. If I had this stock still today, my capital loss would be 6.89% per year. Although my dividends would be at 6.54% per year.
When I was updating my spreadsheet, I noticed that they have been destroying shareholder value in this company for probably 10 years now.
The best that I can say about dividends is that the decreases in dividends seems to have stopped for now with the DPR at a reasonable level. Dividends were decreased by 70% in 2015 and have been flat since then. Dividend yields are moderate (2% to 4% ranges). The current dividend is 4.46%. The 5, 10 median dividends yields are in the good range (5% and above) at 6.17% and 6.61%. The historical median dividend yield is moderate at 3.47%. The 5 and 10 median dividend yields are higher because when the company started to have problems in 2008, yields increased a lot.
The Dividend Payout Ratios could be better especially for CF. The current DPR for EPS in 2019 is good at 53% and 5 year coverage at 55%. The DPR for CFPS for 2019 are still too high at 56% and with 5 year coverage at 57%. I prefer this to be 40% or less. The DPR for Free Cash Flow for 2019 is 40% with 5 year coverage at 52%. The Dividend Coverage Ratio for 2019 is 2.51 (which is good) and the 5 year coverage is low at 1.91.
Debt Ratios are fine. The Long Term Debt/Market Cap Ratio for 2019 is good at 0.42. The Liquidity Ratio for 2019 is 1.41. With Cash Flow after dividends, it becomes a better one at 1.78. The Debt Ratio is good at 3.03. The Leverage and Debt/Equity Ratios for 2019 are good at 1.49 and 0.49, respectively.
The Total Return per year is shown below for years of 5 to 28 to the end of 2019. 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 chart below.
| From | Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|---|
| 2014 | 5 | -21.59% | -0.69% | -5.38% | 4.69% |
| 2009 | 10 | -10.77% | -3.11% | -9.25% | 6.14% |
| 2004 | 15 | -1.64% | -0.09% | -6.52% | 6.43% |
| 1999 | 20 | 3.86% | 3.63% | -2.91% | 6.54% |
| 1994 | 25 | 5.70% | 12.77% | 3.40% | 9.36% |
| 1991 | 28 | 5.94% | 17.26% | 6.15% | 11.10% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 7.49, 8.80 and 10.11. The corresponding 10 year ratios are 9.54, 12.56 and 15.58. The corresponding historical ratios are 10.21, 14.94 and 18.96. The current P/E Ratio is 12.80 based on a stock price of $7.17 and 2020 EPS estimate of $0.56. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a Graham Price of $12.20. The 10 year low, median, and high median Price/Graham Price Ratios are 0.55, 0.72 and 0.88. The current P/GP Ratio is 0.59 based on a stock price of $7.17. 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 0.84. The current P/B Ratio is 0.61 based on a Book Value of $925M, Book Value per Share of $11.81 and a stock price of $7.17. The current ratio is some 28% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
I get an historical median dividend yield of 3.47%. The current dividend yield is 4.46% based on dividends of $0.32 and a stock price of $7.17. The current dividend yield is 29% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively cheap.
I get a 10 year median dividend yield of 6.61%. The current dividend yield is 4.46% based on dividends of $0.32 and a stock price of $7.17. The current dividend yield is 33% below the 10 year median dividend yield. This stock price testing suggests that the stock price is relatively expensive.
The 10 year median Price/Sales (Revenue) Ratio is 1.69. The current P/S Ratio is 1.35 based on 2020 Revenue estimate of $417M, Revenue per Share of $5.32 and a stock price of $7.17. The current ratio is 20% below the 10 year ratio. This stock price testing suggests that the stock price is relatively cheap.
Results of stock price testing is that the stock price is probably reasonable and might be cheap. It is interesting to note that the P/E Ratio of 12.80 is a reasonable one, but the P/GP Ratio of 0.59 and the P/B Ratio of 0.61 are extremely low ratios. When the P/GP Ratio or the P/B Ratio is below 1.00, stocks are generally thought of as cheap. With the extremely low P/B Ratio, where the stock is selling below the book value, signals a cheap stock, but stocks are usually at this position for a reason.
Is it a good company at a reasonable price? The second part can be answered immediately as this stock price is reasonable if not cheap. However, I would not consider buying this stock again. If I had kept it, I would have been losing money on this company since 2001 and would have lost 72.69% of my investment in a capital loss. The loss would have been at 6.89% per year. However, with dividends my capital loss would be down to 0.35% per year. This shows the value of having dividend paying stock, but do you really want to own a stock that only breaks even on a long term basis because of dividends?
When I look at analysts’ recommendations, I find Strong Buy (1), Buy (2) and Hold (5). The consensus would b a Buy. The 12 month stock price is 7.69. This implies a total return of $11.72% with 7.25% from capital gains and 4.46% from dividends based on a stock price of $7.17.
In 2018, 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. What happened was that stock price end up at $5.38. So, the total return was a loss of 22.17% with a capital loss of 26.39% and 4.22% from dividends.
Last year the 12 month stock price consensus was $6.61. This implies a total return of 28.81% with 22.86% from capital gains and 5.95% from dividends based on a stock price $5.58. What happened was that the stock price has ended up at $7.17. So, the total return was 34.44% with 28.49% from capital gains and 5.95% from dividends. The stock price was up 33.6% in 2019 and up 11.3% so far this year.
See what analysts are saying on Stock Chase. There is not much coverage and latest says Asset Management businesses are being killed. Nikhil Kumar on Motley Fool thinks it is cheap and a good time for buying it. A writer on Simply Wall Street says with a beta of 1.53 means the stock price will change at a higher level than the market in booms and busts.. A Writer on Simply Wall Street says the stocks intrinsic value is $6.23 CDN. An announcement on Global Newswire says the proposed merger of Smith & Williamson and Tilney Group has not been approved by the Financial Conduct Authority (FCA).
AGF Management is a Canada-based asset manager with operations and investments in Canada, the United States, the United Kingdom, Ireland, and Asia. AGF Management has a more meaningful portion of its business tied to institutional clients than its peers, with 34% of AUM derived from institutional and subadvised accounts. The company also derives 15% of its managed assets from high-net-worth clients. 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 February 3, 2020 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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