Wajax Corp

First of all, I have to admit that I did not cover all the stocks that I follow in 2011. I guess my pace was too slow. So, until the annual statements for December 2011 come in on the stocks that I own, I will pick up the pace and review one per day.

The first one I want to talk about is Wajax Corp. I have not previously followed this stock and I do not own this stock (TSX-WJX). However, TD Waterhouse put out a report on good dividend paying stocks to own. This was a stock they named. I had not heard of it before, so I decided to investigate it. TD reports is at TD Waterhouse.

This company was an income trust under Wajax Income Fund (WJX.UN). When they decided to switch to a corporation, the dividend was decreased almost 60%. This was in 2009. The dividend was held level in 2010 and since 2011 they have been increasing their dividends. They did 2 dividend increases in 2011. The first was for 20% and the second was for 11%. I think that this bodes well for the futures as far as dividends go, although the 5 year grown in dividends is a negative 7% per year.

The Dividend Payout Ratios over the past 5 years ending in 2011 have a median value of 90% for earnings and 65% for Cash Flow. However, these values are expected to be around 57% and 65% respectively for 2011 and then 65% and 82% respectively for 2012. Lots of companies decreased dividends when they were no longer income trust companies. They had to, to bring their DPRs into line. (See my site for information on Dividend Payout Ratios).

As far as total return goes, this company had returns at 13% and 39% per year over the past 5 and 10 years. The dividend portion of these returns attributable to dividends was 10% and 15% per year. That means that over the past 5 and 10 years 97% and 41% of the return was in dividends. This is likely to be different in the future because this company is now a corporation.

For other growth rates, the last annual statement is dated December 2010. Other growth rates were not as good as dividends and total returns. The growth in revenue per share was basically 0%. Analysts expect the growth for revenues per share to be a healthy 21% for 2011.

Earnings per share growth have been much better at 10% and 22% per year over the past 5 and 10 years. EPS growth is expected to be around 13.5% for 2011. Cash Flow per share has been fairly good at 7.4% and 9% over the past 5 and 10 years. Unfortunately, analysts feel that CF will be lower this year by almost 19%. Usually this close to the annual statement time analysts estimates tend to get more accurate, but they have been known to far off the mark also.

Book Value per share has not grown over the past 5 and 10 years. BV does not tend to grow under income trust companies as they pay too much in distributions. However, BV grew 12% from the end of 2010 to September 2011.

Now I should go on to look at the stock price. The 5 year low and high median Price/Earnings Ratios are 5.82 and 10.89. The current P/E of 10.73 would look high relatively speaking, but the P/E ratios on this stock are quite low and 10.73 is not a high P/E in absolute terms.

I get a current Graham Price of $33.56. The stock price of $39.93 is some 18% higher. On this stock the high difference between the Graham Price and the stock price is the stock price being some 3.5% lower. By this measure the stock price is high. Ideally, a good stock price is at or below the Graham Price, so whatever way you look at this, the stock price seems high on this measure.

I get a 10 year Price/Book Value Ratio of 1.76 and the current one is 2.95, a value some 68% higher and this would point to a rather high stock price. Although the current dividend yield at 6% is good, the 5 year median dividend yield is 12.5%. By this measure, the stock price is high. However, when companies go from income trusts to corporations, it is expected that the dividend yields would go lower.

As far as insider trading goes, there has been a minimal amount of insider buying over the past year, but so small as to not say much to us. There was been no insider selling over the past year. There are 33 institutions that hold 22% of the shares of this company. Over the past 3 months there was been some buying and selling and these institutions have minimally increased their stake in this company (a less than a 1% increase).

When I look at analysts’ recommendations, I see Strong Buy, Buy and Hold recommendations. The consensus recommendation would be a Buy. One Buy recommendations comes with a 12 month stock price of $51. A consensus 12 months stock price is around $46. One Buy recommendation says they feel that the P/E Ratio for this stock should be 14.5, which is an reasonable assumption.

This is an Industrial Products stock and would have a medium risk level. A number of analysts with buy recommendations mention the good dividend yield. One analyst mentions the good balance sheet. The current debt Ratios are certainly good. The Liquidity Ratio is 1.76 (although the 5 year median on this ratio is lower at 1.69. The Asset/Liability Ratio is 1.62. The current Leverage and Debt/Equity Ratios at 2.60 and 1.60 are also good.

At the moment I am not looking to buy any stock, but this stock certainly looks good and I can see why the TD Waterhouse put it on a good dividend paying stock list.

There was also an article on this stock in the G&M in October 2011.

Wajax is a leading Canadian distributor and service support provider of mobile equipment, industrial components and power systems. Reflecting a diversified exposure to the Canadian economy, Wajax has three distinct business divisions. The organization’s customer base covers core sectors of the Canadian economy - mining, oil and gas, forestry, construction, manufacturing, industrial processing, transportation and utilities. Its web site is here Wajax. See my spreadsheet at wjx.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.