Monday, June 23, 2014

Canexus Corporation

On my other blog I am today writing about keeping track of my dividend payments continue...

I do not own this stock of Canexus Corporation (TSX-CUS, OTC-CXUSF). I started to follow this stock in 2012 after reading that it was part of Sentry Small/Mid Cap Income Fund. It is a small cap that pays good dividends. See stocks in this fund on G&M. Sentry home site is here. This stock was also mentioned by Michael Decter in May of 2012. Michael Decter is president and CEO of LDIC Inc.

This is an old income trust company that transitioned to a corporation in 2011. They did not reduce their dividends then, but they probably should have. What they did do was change the dividend payment period from a monthly mode to a cycle 1 mode. They have decreased their dividends in 2014 by almost 27%.

Their Dividend Payout Ratios are too high. They got their DPR ratios for CFPS down to 64% and 67% in 2011 and 2012. However it was back being too high in 2013 at 111%. Analysts expect the DPR for CFPS to be even higher in 2014 at 125% and only to move to a better ratio of around 64% in 2015.

The DPRs for Earnings per Share has basically always been too high. The 5 year median DPR for EPS is at 176%. The DPR for EPS for 2013 is at 912%. It is expected to lower in 2014 but still far too high at 476%. For 2015 it is still expected, even with the dividend cut to be at 125% for 2015. They should not be paying out dividends they cannot afford.

They have increased their outstanding shares by 36% and 20% per year over the past 5 and 9 years. This masked the fact that the company really is not growing. For example revenue growth looks to be at 3% and 4% per year over the past 5 and 8 years. However, Revenue is down by 24% and 14% per year on a revenue per share basis.

Cash Flow growth looks good at 34% and 33% per year over the past 5 and 8 years. However, Cash Flow per Share is down by 2% and up by 9% per year over the past 5 and 8 years. There is a big difference when you look at growth on a per share basis. . There is no growth in EPS either.

So, on to the next thing I do not like and that is the debt ratios. The Liquidity Ratio is at 0.75. If you add in cash flow after dividends it is 0.71. When this ratio is below 1.00, it means that current liabilities cannot be covered by current assets. This is not good.

The Debt Ratio is too low and the Leverage and Debt/Equity Ratios are too high. The Debt Ratio for 2013 is 1.40 and I prefer this to be at least 1.50. The Leverage and Debt/Equity Ratios are 3.49 and 2.49 for 2013. I would prefer them to be below 2.00 and 1.00 respectively.

The last thing I do not like is the Return on Equity. It has been above 10% only twice in the last 8 years. The ROE for 2013 was a miserable 1.1%. However, the ROE on comprehensive income was almost decent coming in at 8.3%. (This means that the earnings are of better quality than they might first appear to be at.)

To me this is not a desirable stock for my portfolio. I do not think that they should pay dividends until they get their act together. I will continue following it for now to see how it makes out. See my spreadsheet at cus.htm.

I will have only one entry for this stock as I must do on some stock because I cover too many stocks to do double entries on all I follow.

Canexus Corporation is engaged in the production of sodium chlorate and chlor-alkali products, and operates a hydrocarbon terminal. They have four plants in Canada and two at one site in Brazil. Its web site is here Canexus.

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. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.

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