This stock (TSX-AFN) is on one of the dividend lists that I follow of Dividend Achievers . This company started to pay dividends in June 2004, when it started trading as a Unit Trust company. It changed to a corporation in June 2009, but there has been no dividend increase since July 2008. Unit Trust can afford to payout more in dividends than corporations can.
I first like to look at the Insider Buying and Insider Selling report. What I found was net selling of $1.3M, with the majority of this selling occurring at the first of this year. There has been some recent insider buying of $.2M, which is small but encouraging. Officers of this company have all increased their shares during this year. The company has also been buying back shares for cancellations.
When I look at the 5 year average P/E low I get a ratio of 8.7 and for the 5 year average P/E high, I get a ratio of 16.7. Using the estimated earnings for 2010, I get a P/E ratio of 13.7. This ratio points to an OK stock price. I get a current Graham Price of $28.45, which is 27% lower than the stock price. The Graham Price for 2009 was $32.47. The reason for the decline is that this company is not expected to earn as much this year as last year. It is expected that earnings for 2011 will be $2.65 compared to 2009 earnings of $3.45. This would be 23% drop.
Earnings for the 1st quarter of 2010 came in at $.49 compared to 1st quarter of 2009, where earnings were $.79. This is a 38% drop in earnings. The earnings estimates for 2010 and 2011 where lowered after the 1st quarterly statements were published. However, this company’s revenue only fell 6.6% in the first quarter, which is a good showing.
The other ratios I look at show the stock price is relatively high. The Price/Book Value Ratio for the last 5 years has an average of 1.92 and the current ratio is higher at 2.67. What you want to see is a current lower P/B ratio. The other ratio is the dividend yield. The current dividend yield is 5.6% and the 5 year average is 8.3%. What you usually look for is a better current dividend yield.
However, Unit Trust companies that convert to corporations are expected to go to yields between 2.5% and 4.5%, which is down significantly from what you expect from Unit Trusts companies. The drop in yields is expected to be cause by lower dividends and/or higher stock prices. This company plans to maintain their dividend rate, so you would expect a rise in stock price over the next few years.
When I look at the analysts recommendations, I find Strong Buy, Buy and Hold recommendations. The consensus recommendation would be a Buy. (See my site for information on analyst ratings.) The main difference in the recommendations seems to be what the stock price will be in the next 12 month period. Analysts seem to think this is a good company and that the dividends are safe.
I think that this is an interest dividend paying stock and I will continue to track it.
Ag Growth is a leading North American manufacturer of portable grain handling equipment, consisting of augers, belt conveyors, grain drying, fencing, post hole augers, and other ancillary grain handling accessories. This company has 1,400 dealers and distributors in Canada and the United States. Its web site is here Ag Growth. See my spreadsheet at afn.htm
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. See my website for stocks followed and investment notes. Follow me on twitter.
No comments:
Post a Comment