Would you please comment on CanWel Building Materials. High yield, high percentage of free cash distributed. Safety of dividend? Degree of insider ownership, at least two persons with same surname among officers. Prospects for expansion, in Canada or USA, sufficient capital therefor.
Thanks for the assignment. CanWel Building Materials Group Ltd. (CWX TSX) distributes building materials through retail chains such as Rona, Home Depot, and Lowes. The company offers a wide range of building supplies as well as home renovation products and hardware. CWX has also added higher margin wood pressure treating services to their mix.
With regards to the sanctity of the dividend you need to consider the payout ratio and the generous dividend yield of 9.33%. In addition you have to recognize that with a market cap of $172.38 million and average daily volume of 36,554 over the last 30 trading days that there is an additional level of risk that needs to be part of your investment thesis. Finally you also need to monitor the health of the housing market which drives the demand for new homes and renovations of existing homes. Brenda Bouw provided a great summary of the fundamental case for CWX that was published in the Globe and Mail on March 2, 2015. Here is the link to that article.
An inspection of the charts will add another dimension to your considerations.
The three-year chart depicts the resistance near $6.25 that has been holding the stock back since September of 2014. Over the same period of time the RSI and the MACD have been providing buy and sell signals as CWX has traded in a range bound pattern with support at $5.50. Currently the shares have been testing support along the 50 and the 200-day moving averages.
The MACD and the RSI on the six-month chart indicate that sellers are currently in control of the market. It appears that CWX is on its way to a retest of support near $5.50. The range bound pattern that has been in place since last September suggests that it would be best to consider trading the shares within the range until we see a breakout or a breakdown emerge on the charts.
Next time I will investigate Amaya Gaming Group Inc. (AYA TSX) on a request from Frances.
Make it a profitable day and happy capitalism!