Wednesday’s TSX breakouts: This stock is recession resistant with a dependable monthly dividend

The S&P/TSX composite index started the month of August off on a negative note.

On Tuesday, major North American equity markets closed with losses. In the U.S., the Dow Jones Industrial Average declined 0.49 per cent, the S&P 500 Index fell 0.64 per cent, and the Nasdaq composite reported a loss of 0.90 per cent. In Canada, the S&P/TSX composite index fell 106 points, or 0.73 per cent to close at 14,477.

There were just 81 stocks in the TSX Index that advanced, 156 stocks declined, and three securities closed the day unchanged. Gold stocks once again provided support to the TSX Index. Amongst the top performers were shares of New Gold, Kinross Gold, Osisko Gold Royalties, and Barrick Gold. Energy stocks were under pressure with the price of oil falling below $40 (U.S.) a barrel. However, the worst performing sector was not energy, it was health care with the share price of Concordia plunging 16.8 per cent.

Year to date, the TSX Index is up 11.28 per cent, and all major U.S. equity markets are still in positive territory with gains ranging between 2.6 per cent and 5.5 per cent.

The key number to watch this week is the U.S. non-farm payroll data, due out this Friday at 8:30 (ET). This morning, the U.S. ADP report was relatively in-line with expectations, showing the addition of 179,000 jobs in the private sector in July, and last month's figure was revised up.

On today's Breakouts Report, there are 34 securities on the positive breakouts list (stocks with positive price momentum), many of which are gold stocks, and 28 stocks on the negative breakouts list (stocks with negative price momentum).

Discussed today is a stock that recently appeared on the negative breakouts list with speculation that the company's upcoming quarterly financial results, reported on Aug. 11, may be weaker-than-originally expected due to weakness in box office sales. Several analysts have revised their quarterly earnings estimates lower.

That being said, any weakness in the share price has often represented a buying opportunity. Furthermore, management is highly committed to the dividend. This is a solid defensive stock with a strong management team. The security I am referring to is Cineplex Inc. (CGX-T).

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

The company

Toronto-based Cineplex is the Canada's largest movie theatre operator with over 160 theatres across the country.

Dividend policy

The company pay shareholders a monthly dividend of 13.5 cents per share, or $1.62 yearly per share. This equates to an annualized dividend yield of 3.2 per cent.

Management is committed to providing investors with dependable dividend income along with prudent dividend increases, announcing annual dividend increases in May of each year going back to 2011.

Valuation

According to Bloomberg, the stock is trading at an enterprise value-to-EBITDA multiple of 11.5 times the 2017 consensus estimate, slightly above its three-year historical average of 11.3 times.

Analysts' recommendations

According to Bloomberg, the one-year target price is $54, which is based on five 'buy' recommendations and four 'hold' recommendations. This target price implies a potential price return of 7.5 per cent over the next 12 months.

Target prices range from a low of $49 to a high of $60. Individual target prices are as follows: $49, $50, three at $52, $55, two at $56, $58, and $60.

The company is scheduled to report its second quarter financial results on Thursday August 11. The consensus earnings before interest, taxes, depreciation and amortization (EBITDA) estimate has moved lower over the past few weeks and now stands at $62.6-million.

The consensus 2016 EBITDA estimate is $277.5-million, and forecast to rise 12 per cent to $309.7 in 2017. The Street is anticipating earnings per share of $1.89 in 2016, rising 18 per cent to $2.23 in 2017.

Chart watch

The share price has been in a long-term uptrend since 2009. Year to date, the stock price has been consolidating, or trading sideways, primarily between $49 and $52. The share price is up nearly 6 per cent so far in 2016.

The company has significant overhead resistance just above $52, rising to this level on several occasions but failing to rise materially above it.

The stock has initial downside support around $50, which is near its 200-day moving average (at $49.89).

The relative strength index is at 35, suggesting the shares are not yet in oversold territory. Generally, a reading at or below 30 indicates an oversold condition.

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.