Can you tell me a little bit about WTEs’ business and how you feel about it in terms of an income investment.
Thanks.
WTE operates a coal storage and unloading/loading terminal in British Columbia. The company has contracts to ship coal from mines in British Columbia, Alberta, and the United States. WTE pays a high yield of 5.84%, and has a relatively cheap forward price-to-earnings ratio of 14.9x. The stock price has been essentially flat over the last year with a small decline, while the high yield has created slight gains. Forecasts suggest that WTE will see a decline across EPS and revenue over the next few years. WTE pays out a high percentage of free cash flows in dividends at about 86% over the last twelve months, while also paying out 46% of cash from operations. Debt is moderate and the company has also paid special dividends the last two years and will do so again this year. We think it is an OK income option that has grown it's dividend at nearly a 30% annualized rate over the last three years. Declining results are cause for concern in the future in addition to size risk, but WTE performed well in 2023 displaying top and bottom line growth. It is seeking to ship/load new products to alleviate its dependence on one.