I own this stock of Ag Growth International (TSX-AFN, OTC-AGGZF). I wanted to review all the income trust stocks touted in the Money Show of 2009. There was a lot of talk at this show about some of the Income Trust being currently good buys with very good yields. It was on the Canadian Dividend Aristocrats and this is why I first investigated this company. By 2011 when I bought this stock, I have been interested in AFN for some time. This stock is a play on the agricultural sector.
When I was updating my spreadsheet, I noticed it is recovering from the lows of 2020. I have had this for almost 10 years and have made a total return of 8.35% per year with 2.20% from capital gains and 6.15% from dividends. They have a loss in 2020 because costs have increased. Like other old income trust companies, this one is also having a hard time in the switch to a corporation. It kept the old high dividend as long as it could, but at some point, the dividend has to be covered by the EPS. With the pandemic problems it could no longer do this. Most of what I have earned was in dividends.
The dividend yields are currently low with dividend growth non-existent. The current dividend yield is low (below 2%) at 1.49%. This company used to be an income trust, so dividend yields in the past were higher. The 5 year median dividend yield is moderate (2% to 4%) at 4.42%. The 10 year and historical median dividend yields are good (5% to 6% ranges) at 5.22% and 5.86%. This stock has a high dividend yield in the past at 12.04% because it was an income trust and income trust can pay larger dividends than corporations.
When this stock changed to a corporation, it kept its dividend flat from 2011 to 2019. However, as a corporation it must be able to coverage the Dividends by the EPS. It reduced the dividends by 75% in 2020. It has raised it dividends in the past before becoming a corporation. The current dividend is affordable. Hopefully, in the future it will again raise dividends, but this is not expected in the short term.
The Dividend Payout Ratios (DPR) are expected to improve over the next little while. The DPR for EPS for 2020 is not calculable because of an earnings loss. The 5 year coverage is at 426%. The DPR for EPS for 2021 is expected to be around 27%. The DPR for CFPS for 2020 is 26% with 5 year coverage at 75%. The DPR for CFPS is not expected to be a good one until 2022 and then it is expected to be around 10%. The DPR for Free Cash Flow for 2020 is 57% with 5 year coverage at 3561%. The DPR for FCF is expected to around 16% in 2021.
Debt Ratios need to be improved. The Long Term Debt/Market Cap for 2020 is 0.74. The Liquidity Ratio is good at 1.53. The Debt Ratio is too low at 1.22. I prefer this to be at 1.50 or higher. It generally was in the past. The Leverage and Debt/Equity Ratios for 2020 are at 5.62 and 4.62. These are too high and I prefer them to be under 3.00 and 2.00, respectively.
The Total Return per year is shown below for years of 5 to 17 to the end of 2020. 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. |
|---|---|---|---|---|---|
| 2015 | 5 | -15.24% | 4.59% | -2.16% | 6.75% |
| 2010 | 10 | -6.56% | 0.59% | -5.05% | 5.64% |
| 2005 | 15 | -1.94% | 14.74% | 4.21% | 10.52% |
| 2003 | 17 | 1.87% | 19.52% | 6.51% | 13.01% |
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 19.76, 25.30 and 29.35. The corresponding historical ratios are 14.34, 21.29 and 25.65. The current P/E Ratio is 17.96 based on a stock price of $40.22 and EPS estimate for 2021 of $2.24. The current ratio is below the 10 year low median ratio. This stock price testing suggests that the stock price is relatively cheap.
I get a Graham Price of $26.44. The 10 year low, median, and high median Price/Graham Price Ratios are 1.43, 1.88 and 2.16. The current P/GP Ratio is 1.52 based on a stock price of $40.22. The current ratio is between the low and median 10 year ratios. 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 2.55. The current ratio is 2.90 based on a Book Value of $259M, Book Value per Share of $13.87 and a stock price of $40.22. The current ratio is 14% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get a 10 year median Price/Cash Flow per Share Ratio of 16.13. The current P/CF Ratio is 64.87 based on a stock price of $40.22, Cash Flow per Share estimate for 2021 of $0.62 and Cash Flow of $11.6M. The current ratio is 302% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
I do not know why the expected Cash Flow per Share for this company is so low for 2021 which is a drop of 84%. The Cash Flow per Share estimate for 2022 is $5.84, with a Cash Flow of $1,089M and a stock price of $40.22. The P/CF Ratio for 2022 is 6.89 and this is 57% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap. The CFPS estimate for 2022 seems to be rather high.
The Cash Flow for the last 12 months is $74.17, Cash Flow per Share is $3.98 and a stock price of 40.22, gives a P/CF Ratio of 7.50. This ratio is 54% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap. It is probably better to exclude P/CF Ratio testing for this stock.
I get an historical median dividend yield of 5.86%. The current dividend yield is 1.49% based on dividends of $0.60 and a stock price of $40.22. The current yield is 75% below the historical median dividend yield. This stock price testing suggests that the stock price is relatively expensive.
I get a 10 year median dividend yield of 5.22%. The current dividend yield is 1.49% based on dividends of $0.60 and a stock price of $40.22. The current yield is 71% below the historical median dividend yield. This stock price testing suggests that the stock price is relatively expensive.
The 10 year median Price/Sales (Revenue) Ratio is 1.25. The current P/S Ratio is 0.67 based on a stock price of $40.22, Revenue estimate for 2021 of $1,126M and Revenue per Share of $60.35. The current ratio is 47% 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 probably reasonable. The best tests are probably the P/S Ratio, the P/GP Ratio, and the P/B Ratio tests. The dividend test would not work because of the recent dividend cut and the dividends has been flat for a while. It used to have high dividend yields because it used to be an income trust. I wonder about the P/E Ratio test as the ratio are on the high side, but a ratio of 17.96 is not that high. I find nothing wrong with the P/GP nor the P/B Ratio tests.
Is it a good company at a reasonable price? The stock price is probably reasonable. I bought this stock for diversification purposes and that has not changed. I still think I will make a reasonable long term return on this stock and I have no intentions of selling this stock.
When I look at analysts’ recommendations, I find Strong Buy (2), Buy (4) and Hold (1). The consensus would be a Buy. The 12 month stock price consensus is $54.00. This implies a total return of 35.75% with 1.49% from dividends and 34.26% from capital gains.
Analysts do not cover this stock well on Stock Chase. Nikhil Kumar on Motley Fool thinks the recent investment and initiatives on the other five continents (outside North America) are expected to provide growth and geographic diversification over the long-term. The executive summary on Simply Wall Street gives this stock 3 stars out of 5 and one risk factor. A writer on Simply Wall Street thought the fair price for this stock in January 2021 was $33.37 CDN$. The Blogger Dividend Earner reviewed this company last year.
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. It has manufacturing facilities in Canada, the United States, Italy, Brazil, France, United Kingdom, and India. Its geographical segments are Canada, United States, and the International. Its web site is here Ag Growth International.
The last stock I wrote about was about was Power Corp of Canada (TSX-POW, OTC-PWCDF) ... learn more. The next stock I will write about will be Kirkland Lake Gold (TSX-KL, NYSE-KL) ... learn more on Friday, May 14, 2021 around 5 pm. Tomorrow on my other blog I will write about Going to Cash.... learn more on Thursday, May 13, 2021 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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