What a journey the AGL Energy Limited (ASX: AGL) share price has been on over the past year. This energy generator and retailer is currently sporting a 52-week low of $6.32 and a 52-week high of $8.88 – a difference of more than 30%.
It was only back in September last year that AGL shares were at their 52-week lows, which were also AGL's lowest price in more than 20 years. That's saying something for a company that has been around since the early 19th century and was asking more than $27 a share as recently as 2017.
Today, AGL has closed at $8.60 a share. But there is little doubt long-term investors are still nursing memories of painful losses. So let's discuss three things that could have the potential to drag AGL shares back from their current levels.
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3 potential threats to AGL shares
Another attempted demerger could smash AGL share price
AGL was making headlines all through last year thanks to its old management's plan to split the business in two. These plans would have carved out AGL's ageing coal-fired generators and other high carbon-risk assets into a separate company. But they were abandoned after a shareholder revolt led by Mike Cannon-Brookes.
These planned changes, and the chaotic unravelling that ended them, almost certainly helped with the descent down to $6.32 last year. If AGL attempts anything similar in the future, investors might act with similar apprehension.
AGL's profits continue to slip
There's little doubt that AGL's woes over the past few years have started with its profits. AGL has been enormously damaged as a business in recent years thanks to a number of structural factors.
In February this year, AGL's latest half-yearly earnings contained the painful revelation that the company's net profit after tax (NPAT) had crumbled by 55% to $87 million. On a statutory basis, the company posted a $1.1 billion loss.
If AGL's earnings and profits continue to fall over the next year or two, investors will probably head for the door.
Another round of dividend cuts
Many investors owned AGL shares historically for the robust and generous dividend payments. But sadly, these have followed AGL's profits down the stairs. In 2019, AGL shares paid their owners $1.19 in dividends per share. But last year, the company forked out just 26 cents per share.
Rubbing salt in the wounds, these dividends were unfranked too. If AGL's dividends keep falling, then even more income investors might feel the need to switch out for another ASX dividend share that can give them what they want.
