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Canexus offers hefty yield and oil-transport kicker (J.P. MOCZULSKI/REUTERS)
Canexus offers hefty yield and oil-transport kicker (J.P. MOCZULSKI/REUTERS)

Schizas’ Mailbag

High-yielding chemical stock is attempting a turnaround Add to ...

Hi Lou,

I’m looking for your thoughts on Canexus. A high dividend with a potential for a turnaround but wondering if you felt the dividend was sustainable in the short term and if now is a good time to buy.

Thanks,

Darrell

Hey Darrell,

Thanks for the assignment.

This will be the third time that I investigate the details surrounding Canexus Corporation. The last time was on April 28, 2014, when the shares were trading for $4.97 and the dividend yield was 10.99 per cent. David wanted to know if the time was right to step in big. The research did not indicate that CUS was about to establish a new uptrend and it was advised the he would be best to wet his toe before jumping in with both feet.

With regards to the dividend, the board decided in June 2014 to cut the quarterly payout to $0.10 from the $0.137 that had been in place since September of 2011. The results for second-quarter 2014 were released on Aug. 5, 2014, and it was mentioned that management was considering the sale of certain assets and was consulting with financial advisors. There has been some speculation that the Bruderheim oil to rail terminal in Alberta, which has seen its cost balloon to $355-million, might be on the block to relieve pressure on the balance sheet.


The three-year chart highlights a stock that is still toiling under an established downtrend line with resistance along the 50-day moving average. Just to put a cherry on top of this wealth-destroying sundae we have to recognize the death cross that has been in play since August of 2013. What has developed since the last analysis conducted in late April is a range bound pattern with support at $4.60 and resistance at $5.00.


The six-month chart provides a close-up of the support at $4.60 that first formed in March. The MACD and the RSI are not currently providing visibility as to what investors might expect with respect to direction. The next scheduled event on the calendar is the release of third-quarter results in November. When and if a buyer can be found for assets that management may decide to dispose of and the effects on the stock is a wild card beyond my ability to measure.

If you are bound and determined to harvest the dividend which yields 8.57 per cent then phase in your purchases. Gradual accumulation will provide a better indication of the stock’s ability to break above resistance at $5.00 and start a new advance.

Make it a profitable day and happy capitalism!

Have your own question for Lou? Send it in to lou@happycapitalism.com.