Stock Analysis

Wajax (TSE:WJX) Will Pay A Dividend Of CA$0.25

TSX:WJX
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Wajax Corporation (TSE:WJX) has announced that it will pay a dividend of CA$0.25 per share on the 4th of January. This means the annual payment will be 5.0% of the current stock price, which is lower than the industry average.

Our analysis indicates that WJX is potentially undervalued!

Wajax's Earnings Easily Cover The Distributions

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. However, prior to this announcement, Wajax's dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS could expand by 13.1% if recent trends continue. Assuming the dividend continues along recent trends, we think the payout ratio could be 29% by next year, which is in a pretty sustainable range.

historic-dividend
TSX:WJX Historic Dividend November 12th 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. The dividend has gone from an annual total of CA$3.24 in 2012 to the most recent total annual payment of CA$1.00. This works out to a decline of approximately 69% over that time. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend Looks Likely To Grow

Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. Wajax has seen EPS rising for the last five years, at 13% per annum. With a decent amount of growth and a low payout ratio, we think this bodes well for Wajax's prospects of growing its dividend payments in the future.

We Really Like Wajax's Dividend

Overall, we like to see the dividend staying consistent, and we think Wajax might even raise payments in the future. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 1 warning sign for Wajax that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

Valuation is complex, but we're helping make it simple.

Find out whether Wajax is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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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.