I was wondering if I could get your opinion on Wajax Corp. They were formally an income fund and now as a stock they pay a good dividend of approximately 7.5 per cent. The stock price appears to be relatively stable and the dividend appears to be increasing over time. Would this be a good choice to add to a portfolio? Are there any potential down sides to a stock like this that I may be missing? Andrew
Wajax Corp. has been in business for 153 years and operates in three core areas of distribution. The first where they earn 50 per cent of their revenue is the mobile equipment sector. The second where they derive 27 per cent of their sales is centred on industrial components. Their third focus is in power systems that contribute 23 per cent to the top line. The dividend yield is currently 6.7 per cent and the payout ratio is 68 per cent.
Here’s the rub. The stock has been selling off since May of 2011 and has a lot of work to do to get back on the right track. The charts will illustrate the trend currently in play.
The three-year chart depicts an established downtrend and a death cross that surfaced in August. These are not signals that suggest a good entry point. From the 52-week high of $44.90 on May 11, 2011 the stock has given up 28.46 per cent, despite an increase in the dividend on August 3.
The six-month chart provides a close up of the downtrend and death cross that have plagued the shares. The bounce off $28.00 stopped dead when it hit resistance along the 50-day moving average. The MACD and the RSI are both pointing downward so I suspect that we may have to retest $28.00.
WJX depends on economic growth to drive its success. The current environment has introduced a lot of uncertainly and that’s not much help when you are distributing heavy equipment, power products, and industrial parts.The company is expected to report their third-quarter results on Nov. 3. Make sure you are on your game in advance of that flex point.
The best time to add a stock to your portfolio is when it's going up. I suggest you put this one on your watch list for a better entry point.
Make it a profitable day and happy capitalism!
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