Things just keep going from bad to worse for the AGL Energy Ltd (ASX: AGL) share price. Today, AGL shares have hit a 12-year low after opening at $11.94 a share and sinking as low as $11.87 soon after.
That is the lowest share price AGL has seen since the depths of the global financial crisis back in 2008, almost 13 years ago. The shares have recovered slightly since this morning and are currently swapping hands for $12.07 a share.
It’s been a stunning fall from grace for AGL, one of the ASX’s largest energy retailers. The company last peaked back in 2017 with a share price of close to $28. That means that, with the current share price of $12.08 and a market capitalisation of just $7.53 billion, shareholders have lost more than 56% of their equity in just 3½ years.
It is strange to think that almost every investor who has picked up AGL shares in the past 12 years and has held them is sitting on a capital loss today.
Dividend to the rescue?
There’s always the dividend though, of course. On current pricing, this dividend is worth a whopping 8.11% per annum. That does look enticing given the current near-zero interest rate environment. Especially so, given AGL told investors last year it would commit to paying out 100% of its earnings as dividends until 2023 (up from the previous target of 75%).
That doesn’t guarantee that the payouts will grow or even be held steady over the next 3 years, mind you. But it does indicate shareholders will be receiving a hefty income stream all the same. Unfortunately for investors though, those dividends will be coming in without franking credits attached, at least until 2023. AGL stated that this was due to the company’s plans to utilise historical tax losses in FY2021 and FY2022.
AGL gives shareholders a blackout
Even so, even this dividend quasi-certainty hasn’t stopped AGL’s downwards spiral. Since this declaration was made back in August, AGL shares are down almost 30%. So why is this happening? Well, the 22% drop in profits that AGL announced back then certainly wouldn’t have helped. But analysts have also been giving AGL the cold shoulder.
My Fool colleague James Mickleboro reported this morning that a note out of Credit Suisse indicated that the broker retained its underperform rating for AGL. It has also slashed its price target to just $11.10 a share. Credit Suisse cited an expected decline in wholesale electricity prices over the next few years as the primary reason for the downgrade.
If that expectation comes to pass, it doesn’t look like things will get any better for AGL’s long-suffering shareholders anytime soon.
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Returns as of 6th October 2020
Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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