Stock Analysis

Wajax (TSE:WJX) Has Announced A Dividend Of CA$0.25

TSX:WJX
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The board of Wajax Corporation (TSE:WJX) has announced that it will pay a dividend on the 4th of October, with investors receiving CA$0.25 per share. Based on this payment, the dividend yield on the company's stock will be 4.6%, which is an attractive boost to shareholder returns.

Check out our latest analysis for Wajax

Wajax's Earnings Easily Cover The Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Before making this announcement, Wajax was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

If the trend of the last few years continues, EPS will grow by 12.8% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could be 31% by next year, which is in a pretty sustainable range.

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TSX:WJX Historic Dividend August 11th 2022

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2012, the dividend has gone from CA$2.40 total annually to CA$1.00. This works out to be a decline of approximately 8.4% per year over that time. 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 Looks Likely To Grow

Given that the track record hasn't been stellar, we really want to see earnings per share growing over time. It's encouraging to see that Wajax has been growing its earnings per share at 13% a year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

Wajax Looks Like A Great Dividend Stock

Overall, we like to see the dividend staying consistent, and we think Wajax might even raise payments in the future. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 1 warning sign for Wajax that investors need to be conscious of moving forward. Is Wajax not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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.