Is it a good company at a reasonable price? The stock price is cheap. It is a cyclical company with an unstable dividend track record. It could be a stock to build a portfolio, but you would not want it in a portfolio where you were relying on its dividends.
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 assets have grown at a slower rate over the past 10 years than their liabilities. Assets have grown by 83% over the past 10 years and Liabilities have grown at 91%. Alpha Spread says that the stock is undervalued by 42%. The stock’s intrinsic value is $36.85.
If you had invested in this company in December 2011, $1,002.56 you would have bought 26 shares at $38.56 per share. In December 2021, after 10 years you would have received $399.45 in dividends. The stock would be worth $631.02. Your total return would have been $1030.47.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $38.56 | $1,002.56 | 26 | 10 | $399.45 | $631.02 | $1,030.47 |
The dividend yields are moderate but no current dividend growth. The current dividend yield is moderate (2% to 4% ranges) at 4.84%. The 5 year and historical dividend yields are also moderate at 4.59% and 4.40%. The 10 year median dividend yield is good (5% and 6% ranges) at 5.58%. Dividends have not increased since 2016.
My data on dividends go back to 1986. From 1986 to 1991, the company paid dividends. They were suspended from 1992 to 2003. In 2004 dividends were restarted. The company became an income trust in 2005 and increased dividends by 678%. Canadian law on income trust changed in 2006. After January 1, 2011 these companies were taxed as corporations. The problem with income trust was they could pay a lot higher dividends. This company started to decrease the dividends in 2009, but they did several decreases until 2006, when dividends were flattened.
The Dividend Payout Ratios (DPR) current rates are good. The DPR for EPS for 2021 is 41% with 5 year coverage at 54%. The DPR for Adjusted Earnings per Share (AEPS) for 2021 is 43% with 5 year coverage at 53%. The DPR for Cash Flow per Share (CFPS) is 15% with 5 year coverage at 19%. The DPR for Free Cash Flow (FCF) is 11% with 5 year coverage at 38%.
Debt Ratios are fine. The Long Term Debt/Market Cap Ratio for 2021 is 0.19 and is low and good. The Liquidity Ratio for 2021 is 1.85 and is high and good. The Debt Ratio is good at 1.56. The Leverage and Debt/Equity Ratio for 2021 are 2.77 and 1.77 are fine.
The Total Return per year is shown below for years of 5 to 35 to the end of 2021. 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. |
|---|---|---|---|---|---|
| 2016 | 5 | 0.00% | 5.28% | 1.03% | 4.25% |
| 2011 | 10 | -7.11% | 0.35% | -4.52% | 4.88% |
| 2006 | 15 | -7.04% | 6.09% | -2.27% | 8.36% |
| 2001 | 20 | 0.00% | 30.10% | 8.60% | 21.49% |
| 1996 | 25 | 0.00% | 9.03% | 2.23% | 6.80% |
| 1991 | 30 | 4.33% | 10.51% | 4.29% | 6.22% |
| 1986 | 35 | 1.67% | 5.99% | 1.48% | 4.50% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are 7.39, 9.77 and 12.15. The corresponding 10 year ratios are 9.38, 11.99 and 14.61. The corresponding historical ratios are 8.22, 10.76 and 13.52. The current P/E Ratio is 6.67 based on a stock price of $20.68 and EPS estimate for 2022 of $3.10. 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 have Adjusted Earnings per Share (AEPS) data. The 5-year low, median, and high median Price/Earnings per Share Ratios are 7.65, 10.10 and 12.56. The corresponding 10 year ratios are 10.67, 12.66 and 14.79. The current P/AEPS Ratio is 7.06 based on AEPS estimate for 2022 of $2.93 and a stock price of $20.68. 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 Graham Price of $37.04. The 10-year low, median, and high median Price/Graham Price Ratios are 0.92, 1.11 and 1.27. The current P/GP Ratio is 0.56 based on a stock price of $20.68. 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 1.52. The current ratio is 1.05 based on a stock price of $20.68, Book Value of $421M and Book Value per Share of $19.68. The current ratio is 31% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
I get a 10-year median Price/Cash Flow per Share Ratio of 4.66. The current ratio is 3.39 based on Cash Flow for the last 12 months of $130.7M, Cash Flow per Share of $6.10 and a stock price of $20.68. The current ratio is 27% 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 4.40%. The current dividend yield is 4.84% based on dividends of $1.00 and a stock price of $20.68. The current dividend yield is 9.9% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a 10 year median dividend yield of 5.58%. The current dividend yield is 4.84% based on dividends of $1.00 and a stock price of $20.68. The current dividend yield is 13% below the historical median dividend yield. This stock price testing suggests that the stock price is relatively reasonable but above the median.
The 10-year median Price/Sales (Revenue) Ratio is 0.34. The current P/S Ratio is 0.24 based on Revenue estimate for 2022 of $1,854M, Revenue per Share of $86.60 and a stock price of $20.68. The current ratio is 29% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
Results of stock price testing is that the stock price is probably cheap. The P/S Ratio testing says this as does all the other testing except for the dividend yield testing. The problem with the dividend yield testing is that the dividends were declining then flat. When this happens, the dividend yield tests are not the best tests.
When I look at analysts’ recommendations, I find Buy (3) and Hold (1) recommendations. The consensus recommendation would be a buy. The 12 months stock price consensus is $25.88. This implies a total return of 29.98 with 21.15% from capital gains and 4.84% from dividends based on a stock price of $20.68.
Billy Kawasaki of 5i Research on Stock Chase says the company is doing many things right. Stock Chase gives this stock 4 stars out of 5. It is not on the Money Sense list. Nikhil Kumar on Motley Fool says it is a stock to buy and hold for the long term. Adam Othman on Motley Fool thinks the high dividend makes this stock worth considering. The company put out a press release on Newswire about their fourth quarter of 2021 results. The company put out a press release on Newswire about their second quarter of 2022 results.
Simply Wall Street reviews this stock via Yahoo Finance. Simply Wall Street has 2 warning signs of unstable dividend track record and large one-off items impacting financial results.
Wajax Corp is a Canadian distributor of industrial components. The company's 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 19, 2022 around 5 pm.
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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