Stella-Jones Inc.: This Dividend Stock Just Hit a 52-Week Low

 

Most dividend stocks are a little boring. After all, choosing to pay a dividend only happens at a certain point in a company’s journey. The arrival of a dividend tends to accompany maturity. 

Stella-Jones Inc. (TSX:SJ) seems more boring than most dividend payers. It manufactures utility poles and railroad ties, and is currently moving into other lumber segments. Yawn.

 

Despite being in a boring industry, Stella-Jones has delivered some impressive growth numbers. In 2012, the company earned $73 million on $717 million in revenue. Those numbers have both grown steadily since. 2016’s profit was $141 million, or $2.04 per share, on $1.55 billion in revenue.

Analysts believe profits will grow to $2.15 per share in 2017 and $2.34 in 2018.

Stella-Jones shares have fallen lately, thanks to one analyst issuing a bearish report. The stock currently trades hands at $38.16, which is a new 52-week low. It puts shares at 18.7 times trailing earnings, which is about the market’s average right now.

 

Some investors might not be impressed by Stella-Jones’s 1.2% yield, but it’s more important to look at dividend growth potential. Five years ago, Stella Jones had a 3.8-cent per share quarterly dividend. The quarterly payout is 11 cents per share today.

The payout ratio is currently 21.5%, which is one of the lowest on the TSX. If the stock increased the payout by 10% per year for a decade, and earnings didn’t increase a bit, it would still only have a payout ratio of 56%. Stella-Jones has loads of dividend growth ahead of it.