Friday's TSX breakouts: Telecom stock has attractive chart, dividend outlook

The list of positive breakouts climbed to 34 names, with more and more gold stocks appearing on the list as the price of bullion jumps to a three-month high. There were just 9 stocks on the negative breakouts list.

Discussed today is a stock that rallied ahead of reporting fourth-quarter results, Manitoba Telecom Services.

Manitoba Telecom is that province's leading telecom company, providing customers with services such as wireless telephone, high-speed internet, and television services.

On February 4, the company reported financial results; however, the key focus for investors was the outlook. Management disclosed its plans from the approximate $420-million it received from its recent sale of Allstream. Management will use the proceeds to repurchase shares, launching a share buyback program, and in addition, will pay down debt.

For 2016, management is forecasting revenues to grow between 0 per cent and 2 per cent. However, solid free cash flow growth, between 10 per cent and 15 per cent, is anticipated with continued operational efficiencies expected to be realized as part of the company's, "three-year transformational program." The majority of the improvements to free cash flow are expected to be realized by the end of 2017.

Dividend Policy

In 2015, management slashed its quarterly dividend by 24 per cent, as the company reset the free cash flow payout ratio to 73 per cent. The company currently pays shareholders a quarterly dividend of 32.5 cents per share, or $1.30 per year, equating to an annualized yield of 4.2 per cent.  Management believes the dividend is sustainable at this rate with the potential to grow over time.

Analysts' Recommendations

Analysts have very mixed views on the stock. According to Bloomberg, there are four analysts with buy recommendations, four analysts with hold recommendations, and six analysts with sell recommendations. The average one-year price target is $30.04, implying the shares are fully valued at current levels. Price targets range from a low of $25 to a high of $34.

The consensus EBITDA forecast is $466-million in 2016, up modestly from $464-million reported in 2015. The consensus earnings per share estimate is $1.34 in 2016, up from 77 cents in 2015.

Chart Watch

The stock chart is attractive, with the share remaining in an uptrend that began in early 2015. The 50-day and 200-day moving averages are both rising, with the stock price trading above both averages.

Year-to-date, defensive stocks have done well amidst the market volatility. Shares of Manitoba Telecom are up 4 per cent, in the middle of the pack relative to its peers. BCE is leading the sector strength with a gain of 8 per cent, Telus is up 5 per cent, and Rogers Communications is higher by 2 per cent.

The stock has technical resistance around $32.50, then at $33. Looking at the downside, there is technical support around $30, close to the stock's 50-day moving average at $29.78, and failing that around $28.50, near its 200-day moving average, which stands at $28.57.

This 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 stock 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 stock 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 stocks in 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. Stocks on the positive breakouts list have displayed positive price momentum during this period. Stocks on negative breakouts list have experienced negative price momentum.