Q: I’m down on GXE in my TFSA and am thinking to add a bit more. It looks like they had a good quarter recently and there’s been lots of insider buying. What’s the outlook like for growth and the security of the dividend? Is there anything else to note other than being a small company in an out of favor sector?
5i Research Answer:
GXE cut its dividend in half in July 2023, and we are always a bit extra cautious after a cut. It is a small company but valuation is very cheap. The balance sheet is fine with debt less than 0.5X one year cash flow. 12-month payout ratio is less than 30% and we would see the dividend as OK for now, but remember it is in a cyclical business. The Chairman has extensive sector experience (he founded Peyto) and we do note the insider buying. We would not see any major 'extra' risks other than those noted.