Monday's TSX breakouts: Small cap stock offers investors a 6.9% dividend yield

Last week ended on a subdued note with major North American equity markets, once again, relatively unchanged.

On Friday, in the U.S., the Dow Jones Industrial Average fell 0.24 per cent, the S&P 500 Index declined 0.14 per cent, and Nasdaq composite dropped 0.03 per cent.

In Canada, the S&P/TSX composite index gave up 8 points, or 0.06 per cent, to close at 14,687. Within the S&P/TSX composite index, there were 103 stocks that advanced, 134 stocks declined, and three securities closed the day unchanged.

The TSX Index is up 0.72 per cent month-to-date, up 4.43 per cent quarter-to-date, and up 12.89 per cent year-to-date.

Looking at commodities, the price of oil had a strong week, finishing the week higher by 9 per cent and is up over 16 per cent month-to-date. The price of natural gas was relatively unchanged during the week, as was the price of gold, which rose a quarter of a per cent, or $3 (U.S.) to $1,342 per ounce.

The Canadian dollar was relatively stable relative to the U.S. dollar, remaining at the 77 cent level.

Given the quiet market activity, today's Breakouts Report is brief. There are 29 securities on the positive breakouts list (stocks with positive price momentum), and 14 stocks on the negative breakouts list (stocks with negative price momentum).

Discussed today is a security that just missed appearing on the positive breakouts list by a penny. While the dividend yield is attractive at 6.9 per cent, the shares may be forming a double-top pattern – a bearish technical formation, suggesting it may be time to take some profits off the table. The security I am referring to is Atrium Mortgage Investment Corp. (AI-T).

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

The Company

Atrium is a provider of residential and commercial mortgages. At the end of the second quarter, 67.4 per cent of the company's mortgage portfolio was residential mortgages, and the balance, 32.6 per cent, was commercial/mixed use mortgages. In terms of geographical exposures, as of the end of June, the three largest regions were as follows: 69 per cent of the company's mortgage portfolio was from the Greater Toronto Area, 17 per cent was from British Columbia, and 9.9 per cent came from Alberta. Atrium is a mortgage investment corporation (MIC) and as such is not taxed on income so long as its taxable income is returned to shareholders within a defined time frame.

After the market closed on July 21, the company announced solid second-quarter financial results. Revenues came in at $10.7-million (Cdn.), up 11 per cent compared to the same period last year. Earnings per share (EPS) was 24 cents, a penny above the consensus estimate of 23 cents per share but unchanged from the second quarter of the previous year. Atrium's mortgage portfolio increased to $505-million from $464-million last quarter. On the second quarter conference call, management indicated that they "conservatively" forecast the mortgage portfolio to be between $475-million and $500-million at the end of the year. The share price rose modestly the following trading day, rising 9 cents or 0.7 per cent.

Atrium is a small cap stock with a market capitalization of approximately $334-million.

Dividend Policy

Atrium pay shareholders a monthly dividend of 7.1667 cents per share, or 86 cents yearly per share. This equates to an annualized dividend yield of 6.88 per cent.

In addition, Atrium pays shareholders a special dividend each year if dividends paid to shareholders is less than earnings realized during the year. The company has announced a special dividend in the second half of each year since 2012.

Valuation

According to Bloomberg, the shares are trading at a price-to-book multiple of 1.14 times the 2016 consensus estimate, in-line with its historical three-year average and below its peak multiple of 1.3 times.

Analysts' Recommendations

According to Bloomberg, there are two analysts whom cover the stock. The analyst at Industrial Alliance Securities has a 'buy' recommendation, and the analyst at TD Securities has a 'hold' recommendation. Both analysts have the same target price of $12.50, suggesting that the share price is fully valued.

Analysts have modestly lowered their forecasts for this year and next year since the start of the year. The consensus EPS estimate is 95 cents for 2016, down from $1 at the beginning of the year, and the consensus EPS estimate for 2017 is currently 97 cents, down from $1.03 on the first of January.

Insider Transactions

According to the website, sedi.ca, in recent months, there has been no buying activity, only selling transactions.

Chart Watch

Year-to-date, the share price is up 9.7 per cent with the share price steadily approaching its previous all-time record closing high, set in March 2015, of $12.79. This is a key resistance level, and if the stock price cannot materially break above this level for a sustainable period, the shares may form a bearish double-top pattern.

If the shares come under pressure and pullback, there is initial downside support around $12, near its 50-day moving average (at $12.04), and failing that, there is support at $11.50, close to its 200-day moving average (at $11.55).

The share price can be somewhat volatile given its low liquidity. The historical two-month average daily trading volume is just over 26,000 shares.

The shares are in neutral territory, neither overbought nor oversold, with a relative strength index reading of 65. Generally, a reading at or above 70 indicates an overbought 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.