Friday’s TSX breakouts: Valuation for this 5.3%-yielding dividend stock is becoming more compelling

This morning, the U.S. August non-farm payrolls data showed 151,000 jobs were created, below expectations of 180,000. This weakness adds support to the argument for the U.S. Federal Reserve staying on the sideline and not raising rates in September.

On Thursday, all major North American stock markets closed in neutral to slightly positive territory.

In the U.S., the Dow Jones Industrial Average added 0.10 per cent, the S&P 500 Index was unchanged, and Nasdaq composite rallied 0.27 per cent.

In Canada, the S&P/TSX composite index posted a gain of 86 points, or 0.59 per cent to close at 14,684. There were 156 securities in the Index that advanced, 76 securities declined, and eight stocks closed the day unchanged. One major mover on the Toronto Stock Exchange was a stock featured on Wednesday's Breakouts report, Cynapsus Therapeutics Inc. (CTH-T). The stock price soared 112 per cent after announcing it received a takeover offer from Sunovion Pharmaceuticals Inc.

The S&P/TSX composite index is up 4.40 per cent quarter to date, and has a gain of 12.87 per cent year to date.

Turning to today's Breakouts Report, there are 37 securities on the positive breakouts list (stocks with positive price momentum) and the number of stocks on the negative breakouts list (stocks with negative price momentum) declined to 16.

Discussed today is a stock that is just pennies away, four cents to be exact, from appearing the negative price breakouts list. While it may be premature to accumulate shares as the stock price could fall back into the $16 level, it is one to put on your radar screen. The security highlighted today is Sienna Senior Living Inc. (SIA-T).

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

The company

Sienna is one of Canada's largest owners and operators of seniors housing with long-term care homes and retirement homes in Ontario and British Columbia.

Sienna operates in an industry with attractive features such as growing demand with aging demographics and high barriers to entry as long-term care homes in Ontario are licensed by the Ministry of Health and Long-Term Care. In addition, since the majority of the company's net operating income stems from long-term care, roughly 74 per cent in the second quarter, Sienna has a source of stable cash flows, which includes provincial government funding.

After the close on August 10, the company reported its second quarter financial results. Sienna reported funds from operations (FFO) of 30 cents per share, in-line with the consensus forecast. Reported adjusted funds from operations (AFFO) was 35 cents per share, a penny above the consensus estimate. Same property net operating income (NOI) grew 5.2 per cent year-over-year, rising 1.2 per cent for the long-term care division, and 19.3 per cent for the retirement division, which jumped sharply higher due to the increase in the average occupancy rate to 92.3 per cent from 87.0 per cent last year. The average total occupancy rate for the long-term care division was 98.8 per cent, up from 98.5 per cent last year. The debt-to-gross book value declined to 53.5 per cent from 55.4 per cent last year. Subsequent to the quarter, at the beginning of August, the company completed a sizeable acquisition of properties in B.C., which is expected to be immediately accretive and add $8-million in NOI in 2016. The share price increased 2 per cent the following trading day.

Dividend policy

The company pay its shareholders a monthly dividend of 7.5 cents per common share, or 90 cents on a yearly basis. This equates to an annualized dividend yield of 5.3 per cent. The company has maintained its dividend at this level since the beginning of 2013.

The dividend appears sustainable with the AFFO payout ratio at 61 per cent in the second quarter.

Related: This stock has 9 'buy' calls and expectation of a double-digit gain

Valuation

The stock is trading at a price-to-adjusted funds from operations (P/AFFO) multiple of 12.2 times the consensus 2017 estimate. In comparison, shares of Extendicare and units of Chartwell Retirement Residences are trading at P/AFFO multiples of 12.7 times and 17.2 times, respectively.

Insider transaction activity

According to Bloomberg, there has been no insider buying or selling activity reported so far this year.

Analysts' recommendations

According to Bloomberg, there are nine analysts with 'hold' recommendations and just one analyst with a 'buy' recommendation. The average one-year target price is $17.91, suggesting the shares have a potential price return of 5 per cent over the next twelve months.

Target prices range from a low of $17 to a high of $18.50. Individual target prices supplied by eight firms are as follows: $17, $17.25, $17.75, two at $18, $18.25, and two at $18.50.

The consensus AFFO per share estimate is $1.35 in 2016, and forecast to rise to $1.40 in 2017. The consensus FFO per share estimate is $1.22 in 2016, and $1.28 in 2017.

Analysts have made minor positive revisions to their forecasts. At the start of the year, the consensus AFFO per share estimate was $1.34 for 2016 and $1.37 for 2017, and the consensus FFO per share estimate was $1.22 for 2016 and $1.25 for 2017.

Chart watch

The share price has increased just over 5 per cent year-to-date, sharply outperforming Extendicare Inc. (EXE-T) with a year-to-date loss of 12 per cent, but underperforming Chartwell Retirement Residences (CSH.UN), reporting a gain of 21 per cent so far this year.

For the past few months, shares of Sienna have been consolidating, or trading sideways, in the $17 to $17.80 range. Currently, the shares are at the lower boundary of this range, and may break below $17. If so, there is initial downside support around $16.68, where its 200-day moving average lies, and failing that there is large support at $16.

There is significant overhead resistance at $18, a level that the share price has retested on several occasions but failed to break above for a sustainable period.

The relative strength index is at 37, suggesting the shares are not yet in oversold territory. Generally, a reading at or below 30 indicates an oversold condition.

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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.