3 things that could tank the AGL share price

These three things could see AGL shares revisit their 52-week low.

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Key points

  • The AGL share price has been a very poor performer over the past five years or so
  • More recently, shareholders have had a pleasing reprieve from their losses
  • But these three catalysts could see AGL shares tank again if they come to pass

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.

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.

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. 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 Scott Phillips.

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