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Workers connect liquid nitrogen storage tanks at a hydraulic fracturing operation near Bowden, Alta., on Feb. 14, 2012. (Jeff McIntosh/The Globe and Mail)
Workers connect liquid nitrogen storage tanks at a hydraulic fracturing operation near Bowden, Alta., on Feb. 14, 2012. (Jeff McIntosh/The Globe and Mail)

Schizas’ Mailbag

Canexus Corporation churns out the dividends Add to ...

Hi Lou,

I would appreciate getting your current analysis of Canexus.

Thank you,

Robert

Hey Robert,

Thanks for the assignment. Canexus Corporation is a producer of chemicals used in the pulp business as well as acids used in oil and gas fracturing operations. The company also operates terminal facilities in Alberta. Canexus delivers low cost output that allows it to issue dividends that yield 6.9 per cent. Management has identified projects that when completed will add to the bottom line. The next flex point for the stock is on Aug. 10, 2012 when second-quarter results will be released.

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An evaluation of the charts will inform my analysis of the prospects and challenges faced by Canexus.

The three-year chart indicates that throughout 2012 there has been overhead resistance in the $8.50 range. The all-time high was hit in 2005 when the shares were trading close to $10.00. There is support that comes in at $7.50 and then again at $7.00. The RSI and the MACD signalled the buy in October of 2011 at $5.00 and the sell in June of 2012 at $8.50. Make sure to monitor these momentum indicators for entry and exit points.

The six-month chart illustrates the resistance along the 50-day moving average that has surfaced since the middle of June. The RSI and the MACD are generating divergent indications which prevents a definitive call on short-term direction.

With a healthy dividend, low cost production, support that comes in within 6 per cent and the 12 per cent of the current trading value and longer-term prospects for added growth, I think Canexus is a hold. Nothing in the charts suggest that this is a growth stock. If however you are looking for a stock that will add a bit of a kick to the income producing portion of your portfolio with a manageable downside, then this one’s for you.

Make it a profitable day and happy capitalism!

Have your own question for Lou? Send it to lschizas@globeandmail.com.

 

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