Wajax (TSE:WJX) Has Affirmed Its Dividend Of CA$0.35

Wajax Corporation's (TSE:WJX) investors are due to receive a payment of CA$0.35 per share on 2nd of October. Based on this payment, the dividend yield on the company's stock will be 6.1%, which is an attractive boost to shareholder returns.

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Wajax's Projected Earnings Seem Likely To Cover Future Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Before this announcement, Wajax was paying out 85% of earnings, but a comparatively small 23% of free cash flows. This leaves plenty of cash for reinvestment into the business.

EPS is set to fall by 0.5% over the next 12 months if recent trends continue. However, if the dividend continues along recent trends, we estimate the payout ratio could reach 83%, meaning that most of the company's earnings is being paid out to shareholders.

View our latest analysis for Wajax

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2015, the annual payment back then was CA$2.40, compared to the most recent full-year payment of CA$1.40. Doing the maths, this is a decline of about 5.2% per year. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

The Dividend's Growth Prospects Are Limited

Given that the track record hasn't been stellar, we really want to see earnings per share growing over time. Unfortunately, Wajax's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year.

Our Thoughts On Wajax's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Wajax's payments, as there could be some issues with sustaining them into the future. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We don't think Wajax is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Just as an example, we've come across 3 warning signs for Wajax you should be aware of, and 1 of them is concerning. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.