Wednesday’s TSX breakouts: This dividend stock features 12 ‘buy’ ratings and 47% upside forecast

This morning, investors are awaiting the U.S. Federal Reserve's interest rate announcement and commentary.

Fed funds futures contracts are only pricing in a 22-per-cent probability of a rate hike and a 58-per-cent likelihood of a rate hike in December.

In advance of this news, the U.S. dollar is sliding with the Canadian dollar back over 76 cents relative to the greenback, and the price of gold is up approximately 1 per cent. The price of oil and natural gas are also strengthening.

Major North American equity markets were uneventful on Tuesday.

In the U.S., the Dow Jones Industrial Average increased 0.05 per cent, the S&P 500 Index inched up 0.03 per cent, and the Nasdaq composite index advanced 0.12 per cent.

In Canada, the S&P/TSX composite index gained 26 points, or 0.18 per cent to close at 14,522. There were 151 securities in the TSX Index that advanced, 90 securities declined in value, and five stocks closed the day unchanged.

The S&P/TSX composite index is down 0.52 per cent month to date, up 3.25 per cent quarter to date, and has a gain of 11.62 per cent year to date.

On today's TSX Breakouts report, there are 32 securities on the positive breakouts list (stocks with positive price momentum), and 18 securities appear on the negative breakouts list (stocks with negative price momentum).

Discussed today is a dividend stock with great expectations, and it is just three cents away from appearing on the positive breakouts list. While this small cap stock may be relatively unknown to investors as it is not listed in the S&P/TSX composite index nor the S&P/TSX SmallCap index, it is not unknown to analysts on the Street. The stock has 12 'buy' recommendations and a one-year target price that suggests there may be 47 per cent upside potential. Furthermore, the stock is liquid with large daily trading volume. The security highlighted today is Tidewater Midstream and Infrastructure Ltd. (TWM-X)

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

The company

Calgary-based Tidewater purchases, sells, and transports natural gas liquids and export to overseas markets. The company has been focused on growing its operations by making strategic acquisitions aimed to vertically integrate its operations.

The company was began trading on the Toronto Stock Exchange in April 2015. The initial public offering price was $1 per share.

Before the market opened on Aug. 15, the company reported solid second quarter financial results. The company reported revenue of $25.7-million, surpassing the consensus estimate of $22.8-million. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) came in at $9.3-million, in-line with the Street's forecast of $9.5-million. The company announced it entered into a take or pay agreement with a new customer that will begin in the fourth quarter. In addition, management reported that it has entered into an agreement to acquire a gas processing facility, with related pipelines and land, and includes a take or pay agreement. The company anticipated this acquisition will add approximately $4-million to annual EBITDA beginning at the end of the first quarter of 2017. The share price jumped 3.7 per cent that trading day, rising to $1.40 from $1.35.

Dividend policy

The company pays its shareholders a quarterly dividend of 1 cent per share, or 4 cents on a yearly basis. This equates to an annualized dividend yield of 2.7 per cent. This yield is lower than the peer average.

Valuation

According to Bloomberg, shares of Tidewater are trading at an enterprise value-to-EBITDA multiple of 6.9 times the 2017 consensus estimate. The company trades at a discount relative to its peers, such as Pembina Pipeline Corp. (PPL-T), AltaGas Ltd. (ALA-T), Keyera Corp. (KEY-T), and Inter Pipeline Ltd. (IPL-T).

Analysts' recommendations

This small cap stock, with a market capitalization of $418-million is well covered by the Street. According to Bloomberg, there are 12 analysts with 'buy' recommendations, and one analyst with a 'hold' recommendation. There are no 'sell' recommendations.

The average one-year target price is $2.16, which implies 47 per cent upside over the next 12 months. Target prices range from a low of $1.75 to a high of $2.55. Individual target prices provided by 12 firms are as follows: $1.75, $1.90, three at $2.00, $2.10, three at $2.25, $2.40, $2.45, and $2.55.

The consensus revenue estimate is $96.7-million in 2016, rising 30 per cent to $125.9-million in 2017. The Street is forecasting EBITDA of $38.5-million in 2016, climbing 49 per cent to $57.5-million in 2017. EPS is forecast to come in at 7 cents in 2016, increasing to 10 cents in 2017.

Analysts have been revising their forecasts higher. At the start of the year, the consensus revenue forecasts were $66.1-million for 2016 and $72.75-million for 2017. The Street's EBITDA forecast was $38.7-million for 2016 and $42.8-million for 2017.

Insider transaction activity

Last month, Joel MacLeod, the president, chief executive officer, and chairman, purchased shares in the public market. On Aug. 19, he acquired 75,000 at a price of $1.50 per share, and on August 22, Mr. MacLeod bought 144,900 shares at a price of $1.47 per share.

In addition, David Wright, whom sits on the company's board of directors, purchased 52,000 shares in the public market in four transactions taking place between August 23 and September 9 at prices ranging from $1.43 per share to $1.48 per share.

This information can be found on the website www.sedi.ca.

According to the September 2016 investor presentation on the company's website, insider ownership stands at approximately 5 per cent.

Chart watch

Year to date, the share price is relatively unchanged, up 2 per cent. The share price has been vacillating, trading up and down in the low to mid-$1 range, principally between $1.25 and $1.45.

The stock price appears to be on the verge of forming a bullish technical signal called a 'golden cross'. This promising pattern occurs when the 50-day moving average crosses above the 200-day moving average.

Should the summer rally in the share price continue, the stock could run to the $1.50 to $1.60 range. After that, there is resistance around $1.80 and then at $2.

If the stock price pulls back, there is initial support just below $1.40, which is near its 50-day moving average and its 200-day moving average (both at $1.38). Failing that, there is strong support around $1.25.

This small cap stock is fairly liquid, making it easy to trade. The historical two-month average daily trading volume is over 1.1-million shares.

The relative strength index is at 59, suggesting the share price is in neutral territory, neither overbought nor oversold. Generally, a reading at or above 70 indicates an overbought condition, and a reading at or below 30 indicates on 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.

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.