Friday’s TSX breakouts: This stock features a spectacular 12% dividend yield

The number of stocks on the positive breakouts list (stocks with positive price momentum) continues to grow and is up to 77 companies now as the S&P/TSX composite index staged its sixth consecutive day of gains on Thursday.

The Index is in positive territory year-to-date, up 0.9 per cent, slightly outperforming the U.S. major equity markets thanks to a recovery in commodity prices. Roughly half of the names on the positive breakouts list are resource stocks. Of the 77 stocks on the positive breakouts list, 30 per cent of the companies are energy stocks, while 18 per cent of companies are gold and silver stocks.

The negative breakouts list (stocks with negative price momentum) stands at just four companies.

A stock with a spectacular dividend yield that appears on the positive breakout lists is discussed below – Liquor Stores N.A. Ltd. (LIQ-T).

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

The company

Liquor Stores operates 254 liquor stores in western Canada and three U.S. States. The company's largest presence is in Alberta, with 179 stores. It operates 35 stores in British Columbia, 23 stores in Alaska, 15 stores in Kentucky and 2 stores in New Jersey.

The company high exposure to the Albertan economy has been a strain on its financial results

Dividend policy

The company pays shareholders a monthly dividend of 9 cents per share, or $1.08 per year. This equates to an annualized yield of over 12 per cent.

The company has maintained its dividend at this level since 2011. However, the dividend was trimmed in early 2011 as it was previously 13.5 cents per share.

There is on-going speculation that there will be a future dividend cut given the cash flow payout ratio is forecast to be almost 100 per cent in 2016.

In November, on the third-quarter conference call, David Gordey, the company's chief financial officer, said: "[W]e believe our cash flow in the context of the current economic environment is sufficient to maintain this level moving forward. However, we are aware that many of our markets are facing uncertainty in the near future. And that the factors that challenged our world resource markets this quarter possess the potential to create further challenges. We will continue to carefully monitor the performance of our stores and the company's cash flow requirements as the economic conditions evolve."

Concerns surrounding the sustainability of the current dividend remains an overhang for the stock. The company's dividend policy will be a key issue that investors will be watching for when the company reports its fourth-quarter results.

Valuation

The stock is valued on an enterprise value-to-EBITDA basis. The stock is currently trading at an EV/EBITDA multiple of 8 times the consensus 2016 estimate. Valuations vary depending on analysts' assumptions. Analysts' target prices range from a low of $10 to a high of $16. Individual target prices are as follows: $10, $10.50, $11, two at $11.50, and $16.

Analysts' recommendations

This small cap stock with a market capitalization of approximately $240-million is well covered by the Street. According to Bloomberg, the stock has four recent buy recommendations and two hold recommendations with the average one-year price target amongst these analysts at $12.33, suggesting that the share price may appreciate over 40 per cent over the next year.

The consensus EBITDA estimate is $40 million in 2015, rising 14 per cent to $45.6 million in 2016. The consensus earnings per share forecast is 55 cents in 2015, rising to 58 cents in 2016.

Chart Watch

The chart is not attractive with the stock's 50-day and 200-day moving averages both trending down. The stock price recently broke down below its December 2008 low of $8.85.

There is downside support at $7.65, where its 50-day moving average lies. There is upside resistance at $10, and then at $11, which is where its 200-day moving average stands.

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 stock 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 stock 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 stocks in 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. Stocks on the positive breakouts list have displayed positive price momentum during this period. Stocks on negative breakouts list have experienced negative price momentum.