Monday, September 22, 2014

Wajax Corp.

On my other blog I am today writing about why revenue is important continue...

I do not own this stock of 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.

2013 was not a good year for this company. Revenues, earnings and cash flow declined as did dividend payments and stock price. The dividends declined by almost 26%. The company was just paying out too much in dividends compared to earnings and cash flow. Analysts do not expect that there will be an increase in dividend over the next few years.

However, analysts do not seem to feel that the dividend is still at risk of another cut. Analysts do not seem to feel that 2014 will be a good year for this company either. However, they feel that the company will start to pick up in 2015.

On the positive side, the 5 and 10 year total return for this company is at 22.38% and 26.72% per year with 11.96% and 10.46% per year from capital gains and 10.42 and 16.26% per year from dividends. Also, the company has paid out special dividends when they could afford to.

The Return on Equity was above 10% each year over the past 9 years and the one for 2013 was at 19.4% and has a 5 year median value of $27.3%. The ROE on comprehensive income was 20% for 2013 and this company has a 5 year median ROE of 27%.

The Debt Ratios are fine on this company.

The 5 year low, median and high median Price/Earnings per Share Ratios are 7.54, 9.61 and 11.75. The 10 year values are similar. The current P/E Ratio is at 14.83 based on a stock price of $38.41 and 2014 EPS estimate of $2.59. This stock price test suggests that the stock is relatively expensive. However, a P/E Ratio of 14.83 on an absolute basis is not particularly high.

The 10 year Price/Book Value per Share Ratio is 2.54 and the current P/B Ratio is 2.62 based on a Book Value of $14.67 and a stock price of $38.41. The current P/B Ratio is only 3.1% higher than the 10 year median P/B Ratio and therefore suggests that the stock price is reasonable.

Using dividend yields, the stock is reasonable on some measures. The 5 year median dividend yield is 6.62% and the current dividend yield at 6.25% is just 5.7% lower. The historical median dividend yield is 6.92% and the current dividend yield of $6.25% is some 9.7% lower. This stock price test suggests that the stock is still within a reasonable range.

For this stock, in the stock price tests that use estimates, the stock price is mostly expensive such as with the P/E Ratio and P/CF Ratio tests. However, where no estimates are used, such as the P/B Ratio and dividend yield tests, the stock price is reasonable.

There is a couple of interesting things. At the end of 2013 for insider trading there was insider buying of shares at $426,025. There has been no insider selling over the past year. The above insider buying occurred around a price of $35.50. There is some insider ownership. For example, the CEO owns shares worth around $1.9M and the CFO owns shares worth around $0.8M.

When I look at analysts' recommendations, I find Buy and Hold recommendations. The consensus recommendation would be a Hold. The 12 month stock price is $38.60. This implies a total return of 6.74% with 6.25% from dividends and just 0.49% from capital gains.

There is a recent article in WKRB about analysts at Raymond James changing their recommendation of market perform or a Hold recommendation to an outperform recommendation or Buy recommendation. There is a recent Newswire announcement of this company amending its bank credit facility, extending the maturity a further three years to August 12, 2019 on more favorable terms than its previous agreement.

Sound bit for Twitter and StockTwits is: Good dividend stock, just not dividend growth. I think that cutting the dividend was a prudent act on the part of management. It is obvious from the history of this company that the dividend will vary. Over the past 5 and 10 years shareholders have had the dividend portion of the total return at 10.42% and 16.26%. This shows that shareholders can and have received good dividends with this company. See my spreadsheet at wjx.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 that I follow.

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. 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.

See my website for stocks followed and investment notes. Follow me on Twitter or StockTwits.

No comments:

Post a Comment