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.
When I was updating my spreadsheet, I noticed that is had a very mixed record with dividends. After a couple of year of no insider trading, insiders are buying this stock. Over the past year insiders have been buying, especially when it went below $17.00. The percentage of insider buying of the market cap is 0.24%. This is high. You would expect insider buying around 0.01% to 0.02%. There has been buying by CFO, CEO and Chairman.
The current dividend yield is good (5% and above). It has been in this range in the past also. The 5, 10 and historical dividend yield is from moderate (2 to 4% ranges) to good (above 5%). These yields are, respectively, 4.99%, 5.87% and 4.31%.
The company has a mixed history for dividends. I have dividend information going back to 1986 (some 32 years). The dividends were suspended in 1992 and restarted in 2004. There were dividend increases until 2013 when they then started dividend cuts. Dividends have been flat since 2016. Analysts do not expect any dividend growth in the near term. This accounts for the Dividend Growth record in the chart below.
The Dividend Payout Ratios are improving. The DPR for EPS for 2018 is 56% with 5 year coverage at 116% DPR coverage has recently been declining. The DPR for CFPS for 2018 is 22% with 5 year coverage at 32%.
Debt Ratios are fine, but long term debt is moving higher and this is not good. The Long Term Debt/Market Cap is fine at 0.66 in 2018 but moved up higher in the second quarter of 2019 to 0.82. Debt is increasing. The Liquidity Ratio is very good at 2.15 in 2018 with 5 year median also at 2.15. The Debt Ratio is fine in 2018 at 1.56 with 5 year median at 1.69. The Leverage and Debt/Equity Ratios are fine in 2018 at 2.80 and 1.80 with 5 year medians at 2.58 and 1.58.
The Total Return per year is shown below for years of 5 to 32 to the end of 2018. Under the Capital Gain column is the portion of the Total Return attributable to capital gains. Under the Dividend column is the portion of the Total Return attributable to dividends. See chart below.
Years of 15 to 25 have zero increases because dividends were suspended at the end of the periods.
| From | Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|---|
| 2013 | 5 | -18.32% | -9.83% | -14.59% | 4.76% |
| 2008 | 10 | -13.16% | 9.17% | -2.38% | 11.55% |
| 2003 | 15 | 0.00% | 29.97% | 4.98% | 24.99% |
| 1998 | 20 | 0.00% | 15.37% | 3.78% | 11.59% |
| 1993 | 25 | 0.00% | 9.84% | 2.47% | 7.36% |
| 1988 | 30 | 1.95% | 6.26% | 0.75% | 5.51% |
| 1985 | 32 | 1.83% | 5.64% | 0.42% | 5.22% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 12.22, 14.23 and 16.23. The corresponding 10 year ratios are 9.38, 11.99 and 14.61. The corresponding historical ratios are 8.76, 11.76 and 14.21. The current ratio is 7.77 based on a stock price of $16.78 and 2019 EPS estimate of $2.16. This stock price testing suggests that the stock price is relatively cheap.
I get a Graham Price of $27.54. The 10 year low, median, and high median Price/Graham Price Ratios are 0.92, 1.14 and 1.34. The current P/GP is 0.61 based on a stock price of $16.78. This stock price testing suggests that the stock price is relatively cheap.
I get a 10 year median Price/Book Value per Share Ratio of 1.98. The current P/B Ratio is 1.07 based on a stock price of $16.78, Book Value of $305.12 and Book Value per Share of $15.61. The current ratio is 46% below the 10 year ratio. This stock price testing suggests that the stock price is relatively cheap. The recovery form 2008 has been long and slow for the economy and this has been tough on a lot of companies. This company is making headway but there is risk involved.
I get an historical median dividend yield of 4.31. The current yield is 5.96% based on dividend of $1.00 and a stock price of $16.78. The current yield is 38% above the historical yield. This stock price testing suggests that the stock price is relatively cheap.
The 10 year median Price/Sales (Revenue) Ratio is 0.37. The current P/S Ratio is 0.20 based on 2019 Revenue estimate of $1,600M, Revenue per Share of $81.86 and a stock price of $16.78. The current ratio is 45% below the 10 year ratio. This stock price testing suggests that the stock price is relatively cheap.
Results of stock price testing is that the stock price is currently relatively cheap. All the testing shows this. It is also nice that the dividend yield test and the P/S Ratio test confirm each other.
Is it a good company at a reasonable price? The company had just turned itself into and income trust in 2005 when Canadian Law on Income Trust was changed in November 2006. Their dividends were too high to be sustainable when they were to change back to a corporation. Their dividend is probably still too high, but analysts do not expect any more cuts to the dividends and expect it will be better covered in the future. This is an industrial stock and therefore will have volitivity in their business. It is uncertain if it will become a dividend growth stock in the future and mainly, I do like dividend growth stocks.
When I look at analysts’ recommendations, I find Buy (2) and Hold (3). The consensus would be a Buy. The 12 month stock price is $20.60. This implies a total return of 28.72% with 22.77% from capital gains and 5.96% from dividends based on a stock price of $16.78.
See what analysts are saying on Stock Chase. They like to company but think it is illiquid, but with a safe dividend. James Watkins-Strand on Motley Fool was positive about this company because of the high dividend yield. A writer on Simply Wall Street thinks the low P/E of this company shows pessimistic market expectations. A writer on Simply Wall Street thinks that the estimated future revenue growth does not seem like a key driver for buying this stock. A writer on Simply Wall Street thinks this stock is worth further investigation. Derek Livingston on Mak Daily says that short selling as decreased by 38% recently.
Wajax Corp is a Canadian distributor of industrial components. Its core business is the sale of parts and service support of equipment, power systems, and industrial components through a network of branches in Canada. Its web site is here Wajax Corp.
The last stock I wrote about was about was Telus Corp (TSX-T, NYSE-TU)... learn more. The next stock I will write about will be Trican Well Service Ltd (TSX-TCW, OTC-TOLWF) ... learn more on Wednesday, September 18, 2019 around 5 pm. Tomorrow on my other blog I will write about SNC Lavalin.... learn more on Tuesday, September 17, 2019 around 5 pm.
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