Thursday, August 1, 2013

Wajax Corp

I do not own this stock Wajax Corp (TSX-WJX, OTC-WJXFF). TD Waterhouse put out a report on good dividend paying stocks to own in November 2011. This was a stock they named. I had not heard of it before, so I decided to investigate it.

This company has a rather mixed history for dividends. Dividends were started in 2004 and the company then switched to an Income trust called Wajax Income Fund (TSX-WJX.UN) with a large increase in dividends. In 2009 they started to reduce dividends, but did not complete the conversion to a corporation until January 1, 2011.

They increased the dividends again starting in 2011. There was an increase also in 2012. However, this year, in 2013, they again decreased the dividends. This current decrease was for 25% and reduced dividends back to where they were at the end of 2011. This company has also at times issued special dividend.

Considering all the above, dividends have increased by 44% per year since 2004, over the past 8 years. Dividends are down by 4.8% per year over the past 5 years. The 5 year median Dividend Payout Ratios for earnings is at 78% and for cash flow at 67%. The DPR for earnings in 2013 is expected to be around 92%, but decreasing to 73% in 2014.

Total returns on this stock to the end of 2012 were 14.19% and 46.46% per year over the past 5 and 10 years. The capital gains portion of these returns was 4.91% and 26.44% per year. The dividend portion of these returns was at 9.29% and 20.02% per year over these periods. Current dividends are at 6.9%.

The outstanding shares of this company have increased by marginal amounts over the past 5 and 10 years. The increase in shares seems to be all attributable to stock options. The last two recessions negatively affect revenues, earnings and cash flow for this company. This is an industrial stock so this is not unexpected.

Analysts seem to expect this year, 2013, to be not as good as last year. If you look at the last 12 months including the first quarter of 2013, revenue, earnings and cash flows are all down compared to the 12 months ending in 2012.

If you look at growth in 5 year running averages over the past 5 and 10 years they are quite different from growth over the past 5 and 10 years, so I am looking at them. The growth in revenue, using 5 year running averages over the past 5 and 10 years is at 2.7% and 1.2% per year. This is rather low growth.

The growth in earnings using 5 year running averages over the past 5 and 10 years is quite different than revenue with growth at 7% and 114% per year over these periods. The growth in cash flow using 5 year running averages over the past 5 and 10 years is quite good at 11% and 12.5% per year.

The Return on Equity for the financial year ending in 2012 was 27.3%. The ROE on comprehensive income was close behind at 27%. This is very good as is the 5 year median ROE of 27.4%.

The debt ratios are all good. The current Liquidity Ratio is 2.29. This ratio has a low, but still very good 5 year median value of 1.90. The Debt Ratio is 1.54 and this ratio has an also good 5 year median value of 1.64. The current Leverage and Debt/Equity Ratios are good at 2.78 and 1.78.

It is nice to see some companies retaining the monthly dividends after switching to corporations from income trust. It would be nice to see rising dividends on this stock, but analysts do generally not expect any dividend increases for 2014. A number of old income trust companies are having difficulties in getting the dividend at the correct level when they have become corporations. I think that it would be better if this company had lower Dividend Payout Ratios.

I think this is a good company. The current dividends are still quite high at 6.9%. See my spreadsheet at wjx.htm.

This is the first of two parts. Second part will be posted on Friday, August 2nd, 2013 and will be here.

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.

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 or StockTwits.

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