Friday’s TSX breakouts: This stock has a history of paying sizable special dividends

This morning, North American stock markets are expected to open higher. Looking at major commodities, the price of oil is higher, while the price of gold is stable, as is the price of natural gas, which rallied strongly on Thursday with a lower-than-expected injection announced in the weekly U.S. Energy Information Administration storage report.

On Thursday, most major North American equity markets were relatively calm for a second day. To recap, in the U.S., the Dow Jones Industrial Average declined 0.25 per cent, the S&P 500 Index fell 0.31 per cent, and the Nasdaq composite index had the steepest decline with a loss of 0.49 per cent.

In Canada, the S&P/TSX composite index added 25 points, or 0.17 per cent to close at 14,644. Strength was led by a bounce back in gold and energy stocks. There were 127 securities in the TSX Index that advanced, 110 securities declined in value, and 10 stocks closed the day unchanged.

The S&P/TSX composite index is down 0.56 per cent month to date, and up 12.56 per cent year to date.

On today's TSX Breakouts report, there are 22 securities on the positive breakouts list (stocks with positive price momentum) and 19 securities on the negative breakouts list (stocks with negative price momentum).

Discussed today is a dividend stock that is just 32 cents away from appearing on the positive breakouts list - Corby Spirit and Wine Limited (CSW.A-T).

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

The company

Toronto-based Corby markets and distributes wines and spirits, both its own brands and represented brands. Some of the company's best-known owned-brands include Polar Ice vodka, J.P. Wiser's Canadian whisky, Lot 40, Pike Creek Canadian whiskies, Lamb's rum, and McGuinness liqueurs. In fiscal 2016, owned-brands represented approximately 80 per cent of the company's total revenue. The company also has an affiliation with Pernod Ricard S.A., Corby represents international brands such as ABSOLUT vodka, Malibu rum, Chivas Regal, Wyndham Estate, Kenwood wines, Mumm champagne, and Kahlua liqueur. A key corporate objective by management is international expansion, seeing the Canadian spirits market as relatively mature.

The company's fiscal year-end is June 30. On August 24, the company reported its fiscal 2016 fourth-quarter and year-end results. Revenue was $140-million in fiscal 2016, up 6 per cent year-over-year from $132.1-million in fiscal 2015. Earnings per share was 89 cents, up over 20 per cent year-over-year from 72 cents in the prior year, the gain was mainly attributed to a higher commission rate earned on the Pernod Ricard brands. To illustrate, revenue from case goods, or its owned-brands, was $111.1-million in fiscal 2016, down 1 per cent due to heightened competitive pressures, from $111.8-million in fiscal 2015. Meanwhile, revenue from commissions, or representation of non-owned brands, increased 40 per cent to $23-million in fiscal 2016 from $16.4-million in the prior fiscal year.

Following the release of its financial result, on August 31, the company announced it agreed to acquire the spirits assets of Domaines Pinnacle Inc. at a cost of $12-million. The acquisition will add brands such as Ungava Premium Canadian gin, Chic Choc spiced rum, Coureur des Bois, and Cabot Trail to its portfolio.

Dividend policy

The company pays its shareholders a quarterly dividend of 19 cents per share, or 76 cents on a yearly basis. This translates to an annualized dividend yield of 3.4 per cent. The company has periodically raised its dividend. In addition, in November 2015 and November 2014, the company announced special cash dividends of 62 cents per share each time.

Analysts' recommendations

This small cap consumer staples stock, with a market capitalization of approximately $600-million, is covered by two analysts. The two firms with analyst coverage are EVA Dimensions and PI Financial Corp. One analyst has a 'buy' recommendation but does not provide a target price. The other analyst also has a 'buy' recommendation and has a target price of $26.50, implying there is 17 per cent potential upside potential.

Chart watch

Year-to-date, the stock price is up 20 per cent. The small cap stock is not included in the S&P/TSX composite index; however, if it was included, it would be amongst the top performers, behind stocks such as Premium Brands Holdings Corp. (PBH-T), Saputo Inc. (SAP-T), and Maple Leaf Foods Inc. (MFI-T).

The share price has initial overheard resistance around $24, and after that at $26, and then at $28.

In terms of downside support, there is initial support around its 50-day moving average, which sits at $21.76, and failing that, at $20, which is close to its 200-day moving average (at $19.72).

The two-month historical average daily trading volume is just over 12,000 shares.

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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.

Securities screened are from the S&P/TSX composite index, the S&P/TSX Small Cap index, as well as Canadian small cap stocks outside of these indexes that have a minimum market capitalization of $200-million.

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