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 if you look at Dividend Yields compared to Total Returns for the 5, 10, 15, 20, 25, 30 and 34 year periods, I find the following. For example, total return over the past 5 years is 6.27% per year, the starting Dividend yield (the one from 5 years ago) was 7.05%. From the point of view of this chart, the highest dividend yields generally got the highest total return. Unfortunately for this stock there were years of no dividends (and therefore no dividend yields).
| Year | Tot Return | Start Div |
|---|---|---|
| 5 | 6.27% | 7.05% |
| 10 | -1.05% | 4.89% |
| 15 | 6.85% | 4.05% |
| 20 | 28.30% | 0.00% |
| 25 | 9.47% | 0.00% |
| 30 | 10.24% | 7.54% |
| 34 | 5.67% | 5.60% |
The dividend yields are moderate with dividend growth non-existent. The current dividend yield is moderate at 4.18%. The 5 and 10 year median dividend yields are good (5% and 6% ranges) at 5.12% and 5.90%. This company used to be an income trust. (2005 to 2011). Income Trust companies tend to have higher dividend yields than corporations. The historical dividend yield is moderate at 4.50%. The historical dividend yield since becoming a corporation is higher at 5.90%. This is because this company paid no dividends from 1992 to 2003.
This company cut dividends in 2009 and then cut them again in 2013 and 2015. The dividends have been flat since 2016. It is hard to tell if the company will become a dividend growth company again or not. However, it would seem that there will be no dividend increases in the near term.
The Dividend Payout Ratios (DPR) are fine. The DPR for EPS for 2020 is 63% with 5 year coverage at 68%. The DPR for CFPS for 2020 is 18% with 5 year coverage at 22%. The DPR for Free Cash Flow for 2020 is 19% with 5 year coverage at 76%. Sites I look at for FCF do not agree on what it is. This is a problem when looking at FCF.
Debt Ratios are fine. The Long Term Debt/Market Cap Ratio for 2020 is 0.50 and is lower in 2021 at 0.29 due to lower debt and higher market cap. The Liquidity Ratio is very good at 2.34. The Debt Ratio is good at 1.50. The Leverage and Debt/Equity Ratios are too high at 3.01 and 2.01, but just above what I like. I prefer them to be below 3.00 and below 2.00
The Total Return per year is shown below for years of 5 to 34 to the end of 2020. 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.
| From | Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|---|
| 2015 | 5 | -3.31% | 6.27% | 0.35% | 5.92% |
| 2010 | 10 | -5.71% | -1.05% | -7.39% | 6.34% |
| 2005 | 15 | -1.45% | 6.85% | -3.83% | 10.68% |
| 2000 | 20 | 0.00% | 28.30% | 7.53% | 20.76% |
| 1995 | 25 | 0.00% | 9.47% | 1.64% | 7.83% |
| 1990 | 30 | 2.41% | 10.24% | 3.27% | 6.97% |
| 1986 | 34 | 1.72% | 5.67% | 0.48% | 5.19% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 8.76, 12.23 and 15.69. The corresponding 10 year ratios are 9.38, 11.99 and 14.61. The corresponding historical ratios are 8.71, 11.01 and 13.52. The current P/E Ratio is 9.80 based on EPS estimate for 2021 of $2.44 and a stock price of $23.90. The current ratio is between the low and median ratios of the 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a Graham Price of $30.99. The 10 year low, median, and high median Price/Graham Price Ratios are 0.92, 1.14 and 1.34. The current P/GP Ratio is 0.77 based on a stock price of $23.90. The current ratio is below the low ratio of the 10 year median ratios. 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 1.61. The current P/B Ratio is 1.37 based on a Book Value of $375M, Book Value per Share of $17.50, and a stock price of $23.90. The current ratio is 15% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a 10 year median Price/Cash Flow per Share Ratio of 6.83. The current P/CF Ratio is 2.60 based on a stock price of $23.90, Cash Flow for the last 12 months of $196.8M, and Cash Flow per Share of $9.19. The current ratio is 62% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
I get an historical median dividend yield of 4.50%. The current dividend yield is 4.18% based on dividends of $1.00 and a stock price of $23.90. The current ratio is 7% below the historical median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get a 10 year median dividend yield of 5.90%. The current dividend yield is 4.18% based on dividends of $1.00 and a stock price of $23.90. The current ratio is 29% below the historical median ratio. This stock price testing suggests that the stock price is relatively expensive.
The 10 year median Price/Sales (Revenue) Ratio is 0.36. The current P/S Ratio is 0.31 based on Revenue estimate for 2021 of $1,670M, Revenue per Share of $78.00 and a stock price of 23.90. The current ratio is 16% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
Results of stock price testing is that the stock price is probably reasonable. The P/S Ratio test is good and it says the stock price is reasonable and below the median. They have mucked around a lot with the dividends and it has been flat for the past 5 years. The dividend tests work best with dividend growth stocks. The P/B Ratio test is a good one and it says the stock price is reasonable and below the median.
Is it a good company at a reasonable price? The stock price seems reasonable. This has not been a good dividend stock. I prefer dividend growth stocks. It was an income trust that had to change to a corporation. A lot of these companies have had difficulty getting the dividend payouts right. The EPS is expected to grow in the future and this is good.
When I look at analysts’ recommendations, I find Buy (2) and Hold (1). The consensus is a Buy. The 12 month stock price consensus is $28.23. This implies a total return of 22.30% with 18.12% from capital gains and 4.18% from dividends.
The two latest analysts say on Stock Chase that this stock is their top pick. Nikhil Kumar on Motley Fool thinks that this is a company to buy and hold for the long term. The executive summary on Simply Wall Street gives this stock 2 stars out of 5 and list 4 risks. A writer on Simply Wall Street thinks this stock should be considered because EPS are growing. A writer on Simply Wall Street says the ROE for this company is 10% and that is at the average for the company’s industry. The company on Cision talks about the results for the second quarter of 2021. A writer on Simply Wall Street is worried about the debt of this company.
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 Monday, September 13, 2021 around 5 pm.
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