Wajax Corporation (TSE:WJX) Goes Ex-Dividend Soon

Wajax Corporation (TSE:WJX) stock is about to trade ex-dividend in three days. The ex-dividend date is commonly two business days before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Therefore, if you purchase Wajax's shares on or after the 16th of June, you won't be eligible to receive the dividend, when it is paid on the 3rd of July.

The company's upcoming dividend is CA$0.35 a share, following on from the last 12 months, when the company distributed a total of CA$1.40 per share to shareholders. Based on the last year's worth of payments, Wajax has a trailing yield of 6.0% on the current stock price of CA$23.38. If you buy this business for its dividend, you should have an idea of whether Wajax's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

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Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Wajax paid out more than half (74%) of its earnings last year, which is a regular payout ratio for most companies. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. It distributed 31% of its free cash flow as dividends, a comfortable payout level for most companies.

It's positive to see that Wajax's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

See our latest analysis for Wajax

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're not enthused to see that Wajax's earnings per share have remained effectively flat over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Wajax has seen its dividend decline 5.2% per annum on average over the past 10 years, which is not great to see.

To Sum It Up

Should investors buy Wajax for the upcoming dividend? We're not enthused by the flat earnings per share, although at least the company's payout ratio is within reasonable bounds. Additionally, it paid out a lower percentage of its free cash flow, so at least it generated more cash than it spent on dividends. It might be worth researching if the company is reinvesting in growth projects that could grow earnings and dividends in the future, but for now we're not all that optimistic on its dividend prospects.

So if you want to do more digging on Wajax, you'll find it worthwhile knowing the risks that this stock faces. Our analysis shows 3 warning signs for Wajax that we strongly recommend you have a look at before investing in the company.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.