Friday’s TSX breakouts: This strong multi-year performer has a secure dividend

Once again, major North American equity markets were relatively neutral, trading sideways.

On Thursday, in the U.S., the Dow Jones Industrial Average lost 16 points, or 0.09 per cent, the S&P 500 Index gained 3 points, or 0.16 per cent.

In Canada, the S&P/TSX composite index increased 6 points, or 0.04 per cent. Within the TSX Index, there were 132 securities that advanced, 105 stocks declined, and three stocks closed the day unchanged.

While equity markets have been in a holding pattern this week, the price of oil have been sliding and this morning cracked below the $41 level. Yet, despite the recent weakness in the price of oil, the Canadian dollar has remained relatively stable, declining slightly, but remaining in the mid-70 cents range relative to the U.S. dollar.

This morning, investors will be closing watching for the release of U.S. second quarter gross domestic product (GDP) data, which is due out at 8:30 a.m. (ET).

Today may be a quiet day in Canadian equity markets ahead of the civic holiday on Monday August 1 in B.C., Alberta, Saskatchewan, Ontario, New Brunswick and in Nunavut. The Toronto Stock Exchange and the TSX Venture Exchange will both be closed on Monday.

Month to date, the TSX Index is up 3.47 per cent, and year to date, the TSX Index is up 11.86per cent.

On today's Breakouts Report, there are 39 securities on the positive breakouts list (stocks with positive price momentum), and 19 stocks on the negative breakouts list (stocks with negative price momentum).

Discussed today is a stock that started Thursday off on a positive note, appearing on the intraday positive breakouts report. However, by the close, the share price gave up its earlier gains, declined 0.7 per cent, and narrowly missed appearing on today's breakouts report. That being said, the stock has been a solid multi-year performer given its defensive nature and secure dividend. The stock I am referring to is George Weston Ltd. (WN-T).

A brief outline is provided below that may serve as a springboard for further fundamental research.

The company

George Weston is involved in food processing and distribution. The company operates two business segments: Weston Foods and Loblaw. In addition, George Weston has an interest in Choice Properties Real Estate Investment Trust. At the end of the first quarter, George Weston had a 46 per cent interest in Loblaw and a 5.6 per cent interest in Choice Properties REIT.

Before the market opened on May 10, the company reported first-quarter financial results that were relatively in-line with expectations. Consolidated adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) came in at $890-million, in line with the Street's forecast of $890.5-million. Adjusted EBITDA from Weston Foods was $63-million, unchanged from the same period last year. Adjusted earnings per share (EPS) was $1.31, a penny above the consensus estimate. The share price rallied 1.7 per cent that trading day.

In the most recent Management's Discussion and Analysis, the outlook for the company was positive, with management expecting adjusted EBITDA to gain momentum in the second half of this year with the addition of new plant capacity.

Dividend policy

The company pay shareholders a quarterly dividend of 44 cents per share, or $1.76 yearly per share. This equates to an annualized dividend yield of 1.5 per cent.

Management has steadily increased the dividend over the past number of years. The most recent dividend hike was announced in May, when the dividend was increased 3.5 per cent to 44 cents from 42.5 cents per share.

Management was not active in its share buyback program during the first quarter.

Valuation

The stock can be valued using a sum-of-the-parts approach, valuing the individual business segments: Loblaw, Weston Foods, as well as the company's ownership in Choice Properties Real Estate Investment Trust.

The average one-year price target is $127, which equates to a potential price return of 9 per cent over the next 12 months. Target prices range from a low of $120 to a high of $139. Individual target prices provided by seven firms are as follows: two at $120, $125, $127, $128, $131, and $139.

Analysts' recommendations

According to Bloomberg, there are seven buy recommendations and two hold recommendations. There are no sell recommendations.

The consensus EBITDA estimate is $3.99-billion in 2016, anticipated to increase to $4.15-billion in 2017. The Street is forecasting EPS of $6.43 in 2016, rising nearly 9 per cent to $6.99 in 2017.

Chart watch

Shares of George Weston have been in an uptrend since mid-2012, making higher highs and higher lows.

Over the past five months, the share price has been consolidating, trading sideways, largely between $110 and $115. The share price recently broke above this range but we could see a throwback, or return to this trading range.

There is initial upside resistance at $120, and after that there is strong overhead resistance around $130. The stock has downside support around $113, which is near its 50-day moving average (at $113.26) and solid support at $110, which is also close to its 200-day moving average (at $110.24).

The Breakouts file is a technical analysis screen intended to identify companies that are technically breaking out. In addition, this report highlights a company's dividend policy, analysts' recommendations, and provides a brief technical analysis for a security to provide readers with more information.

If a stock appears on the positive breakouts list, this indicates positive price momentum, and that a company may be worthwhile for investors to look at the fundamentals in order to determine if the recent price strength is warranted and will continue. If a security appears on the negative breakouts list, this indicates negative price momentum, and may be indicative of either deteriorating fundamentals or perhaps indicates a buying opportunity.

A technical analysis screen does not replace fundamental analysis, but can help identify companies worth having a closer look at.

Below is a list of securities principally from the S&P/TSX composite index and the S&P/TSX Small Cap index that are technically breaking out, reaching new 55-day highs or lows. Securities on the positive breakouts list have displayed positive price momentum during this period. Securities on negative breakouts list have experienced negative price momentum.