Skip to main content
analysis

On today’s TSX Breakouts report, there are 85 stocks on the positive breakouts list (stocks with positive price momentum), and eight securities are on the negative breakouts list (stocks with negative price momentum).

Discussed today is a dividend stock that appears on the positive breakouts list with the share price closing at a record high. In addition to price appreciation, the stock offers investors an attractive yield, currently yielding 5 per cent. The stock has 17 buy recommendations with a potential 15-per-cent total return forecast.

The security highlighted today is Pembina Pipeline Corp. (PPL-T).

A brief outline is provided below that may serve as a springboard for further fundamental research when conducting your own due diligence.

The company

Calgary-based Pembina is a midstream service provider for the North American energy industry. The company owns and operates pipelines that transport products derived from natural gas and hydrocarbon liquids. In addition, Pembina owns and operates gas gathering and processing facilities, as well as an oil and natural gas liquids infrastructure business. The company has three core reporting segments – pipelines, facilities, and marketing and new ventures.

The company provides reliable and growing earnings given that its business is highly contracted with approximately 85 per cent of its adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) fee-based (take-or-pay/cost-of-service and fee-for-service). Consequently, management has been able to deliver steady dividend growth. In addition, the company has growth opportunities through its development projects and acquisitions.

In December, the company completed the $4-billion purchase of Kinder Morgan Canada Limited and the U.S. portion of the Cochin Pipeline.

In a news release, president and chief executive officer Mick Dilger reiterated the synergies anticipated: “Our teams will now focus on completing the integration activities and pursuing the $100 million of additional run-rate adjusted EBITDA we expect to realize over the coming years.”

Management recently issued its 2020 guidance, expecting EBITDA of between $3.25-billion and $3.55-billion, up from expected EBITDA of between $2.95-billion and $3.05-billion to be reported 2019.

In a few weeks, news about the advancement of the environmental review process on the Jordan Cove LNG terminal from the FERC (Federal Energy Regulatory Commission) is expected. Issuance of the final certificate from the FERC is expected on Feb. 13. Permitting of the proposed Jordan Cove project with Oregon State is another hurdle faced by the company.

On Monday, the world economic outlook report was released by the IMF (International Monetary Fund) in which they trimmed their global growth forecasts ever so slightly, anticipating 2.9 per cent growth in 2019 and 3.3 per cent growth in 2020, down from its previous forecast of 3 per cent and 3.4 per cent, respectively. If commodity prices remain firm, this may provide additional support for the stock.

In November, the company reported relatively in-line third-quarter financial results. Adjusted EBITDA came in at $736-million, just shy of the $741-million consensus estimate.

The stock is dual-listed, trading on the Toronto Stock Exchange under the ticker PPL, and on the New York Stock Exchange under the ticker PBA.

Dividend policy

The company pays shareholders a monthly dividend of 21 cents per share, or $2.52 per share on a yearly basis. This translates to an annualized dividend yield of 5 per cent.

The company has increased its dividend at least once in each calendar year since 2012. In 2019, management announced two dividend increases, in May and Dec. The most recent dividend hike was announced on Dec. 16, a 5-per-cent dividend increase.

Analysts’ recommendations

This large-cap stock with a market capitalization of over $25-billion is well-covered by the Street.

Since reporting its third-quarter earnings results in Nov., 19 analysts have issued research reports, of which 17 are buy recommendations and two analysts (Wells Fargo Securities’ Praneeth Satish and Morningstar’s Joe Gemino) have a neutral-equivalent recommendation.

Revised recommendations

So far this month, two analysts have revised their recommendations. Elias Foscolos, an analyst at Industrial Alliance Securities, reduced his recommendation to “buy” from “strong buy,” but but he maintained his target price at $56.

CIBC World Markets’ Robert Catellier increased his target price to $59 from $56.

Financial forecasts

The consensus EBITDA estimates are $2.99-billion in 2019 and $3.35-billion in 2020. The consensus AFFO per share estimates are $4.31 in 2019, rising over 6 per cent to $4.60 in 2020.

Financial forecasts have edged higher for 2020. To illustrate, three months ago, the EBITDA forecasts were $2.99-billion for 2019 and $3.27-billion for 2020.

Valuation

Analysts commonly value the stock using a discounted cash flow methodology, using an enterprise value-to-EBITDA multiple, or on a price-to-AFFO basis.

According to Bloomberg, the stock is trading at an EV/EBITDA multiple of 10.9 times the 2020 consensus estimate, below the three-year historical average multiple of 12.8 times. On a price-to-AFFO basis, the stock is trading at a multiple of 11 times the 2020 consensus estimate.

The average one-year target price is $55.34, implying the share price may appreciate nearly 10 per cent over the next 12 months, providing a total return of 15 per cent (including the 5 per cent dividend yield). Target prices range from a low of $48.75 (from Morningstar’s Joe Gemino) to a high of $60 (from National Bank’s Patrick Kenny).

Individual target prices provided by 19 firms are as follows in numerical order: $48.75, $50, $52, three at $54, three at $55, three at $56, $57, two at $58, three at $59, and $60.

Insider transaction activity

Numerous insiders recently exercised their options and sold shares in the public market. Several transactions by c-suite executives are noted below.

On Jan. 14, Paul Murphy, senior vice-president and corporate services officer, exercised his options, receiving 15,000 shares at a cost per share of $38.76, and sold 15,000 shares at a price per share of $50.1529, which left 12,958 shares remaining in this account. Net proceeds, not including trading fees, totaled over $170,000.

On Jan. 10, president and chief executive officer Mick Dilger exercised his options, receiving 55,215 shares at a cost per share of $33.80, and sold 55,215 shares at a price per share of $50.0404, after which this particular account did not hold any shares. Net proceeds, not including trading fees, totaled over $896,000.

On Jan. 10, Stu Taylor, senior vice-president – marketing and new ventures and corporate development officer, exercised his options, receiving 80,203 shares at an average cost per share of approximately $39.33, and sold 80,203 shares at a price per share of $50.0253, after which this particular account held 16,261 shares. Net proceeds, not including trading fees, totaled over $857,000.

On Jan. 9, chief financial officer Scott Burrows exercised his options, receiving a total of 22,805 shares at an average cost per share of approximately $40.34, and sold 22,805 shares at an average price per share of roughly $50.56, which left 5,500 shares remaining in this account. Net proceeds from the sale, excluding commission charges, amounted to over $232,000.

Please note that this list features recent insider transaction activity; it does not convey total ownership information as an insider may hold numerous accounts.

Chart watch

The stock chart is attractive with the share price closing at a record high of $50.42 on Jan. 17.

This month, the company’s share price exhibited a “Golden Cross” – a bullish technical signal that occurs when the 50-day moving average crosses above the 200-day moving average. For nearly a year, the share price has been trading in a band, predominately between $45 and $49, and the share price finally closed above $50 on Jan. 9.

In terms of key resistance and support levels, the next major level of resistance is around $55. Looking at the downside, the stock price has initial technical support around $47.50, which is close to its 50-day moving average (at $47.57) and its 200-day moving average (at $47.45). Failing that, there is strong technical support between $45 and $46.

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, financial forecasts, 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.

Positive BreakoutsJan. 17 close
AQN-TAlgonquin Power & Utilities Corp $19.33
ATD-B-TAlimentation Couche-Tard Inc $44.43
HOT-UN-TAmerican Hotel Income Properties REIT LP $7.38
ATZ-TAritzia Inc. $24.71
ACO-X-TAtco Ltd $51.43
BTO-TB2Gold Corp $5.38
BLDP-TBallard Power Systems Inc $15.74
BMO-TBank of Montreal $103.80
BLU-TBELLUS Health Inc. $11.49
BLN-TBlackline Safety Corp. $6.65
BLX-TBoralex Inc $26.38
BYD-TBoyd Group Services Inc. $222.86
BAM-A-TBrookfield Asset Management Inc $81.38
BPY-UN-TBrookfield Property Partners LP $25.95
BTB-UN-TBTB Real Estate Investment Trust $5.32
CNR-TCanadian National Railway Co $125.62
CP-TCanadian Pacific Railway Ltd $343.08
CU-TCanadian Utilities Ltd $40.07
CFX-TCanfor Pulp Products Inc $9.41
WEED-TCanopy Growth Corp. $32.57
CPX-TCapital Power Corp $35.48
CS-TCapstone Mining Corp $0.88
GIB-A-TCGI Group Inc $113.35
CHP-UN-TChoice Properties REIT $14.77
CHR-TChorus Aviation Inc $8.40
CKI-TClarke Inc $13.29
CIGI-TColliers International Group Inc $109.34
CUF-UN-TCominar Real Estate Investment Trust $14.66
CRH-TCRH Medical Corp $5.30
CRR-UN-TCrombie Real Estate Investment Trust $16.36
CRT-UN-TCT Real Estate Investment Trust $16.37
DSG-TDescartes Systems Group Inc $60.38
UFS-TDomtar Corp. $52.13
D-UN-TDream Office Real Estate Investment Trust $32.43
EFN-TElement Fleet Management Corp. $12.65
EMA-TEmera Inc $58.15
ENB-TEnbridge Inc $52.97
FFH-TFairfax Financial Holdings Ltd $612.66
FC-TFirm Capital Mortgage Investment Corp $14.89
FTS-TFortis Inc $56.59
FNV-TFranco-Nevada Corp $138.00
MIC-TGenworth MI Canada Inc $60.91
GEI-TGibson Energy Inc $27.66
GRT-UN-TGranite Real Estate Investment Trust $69.65
GWO-TGreat-West Lifeco Inc $34.07
GCG-TGuardian Capital Group $27.99
HDI-THardwoods Distribution Inc $17.03
HARV-THarvest Health & Recreation Inc. $4.65
H-THydro One Ltd. $26.19
IAG-TiA Financial Corporation Inc. $73.76
IGM-TIGM Financial Inc $39.41
INE-TInnergex Renewable Energy Inc $18.22
IIP-UN-TInterRent REIT $16.51
JWEL-TJamieson Wellness Inc. $26.69
KNT-TK92 Mining Inc. $3.36
LUG-TLundin Gold Inc $9.07
MAXR-TMaxar Technologies Ltd. $26.42
TPX-B-TMolson Coors Canada Inc. $75.75
NA-TNational Bank of Canada $73.52
OSB-TNorbord Inc $39.81
NPI-TNorthland Power Inc $28.36
NVU-UN-TNorthview Apartment REIT $31.16
OTEX-TOpen Text Corp $61.37
PPL-TPembina Pipeline Corp $50.42
PL-TPinnacle Renewable Holdings Inc. $10.71
PTM-TPlatinum Group Metals Ltd $3.30
RCH-TRichelieu Hardware Ltd $28.90
SHOP-TShopify Inc. $594.57
SIA-TSienna Senior Living Inc $19.10
STN-TStantec Inc $38.98
SLF-TSun Life Financial Inc $63.55
TRP-TTC Energy Corp. $70.85
T-TTELUS Corp $51.30
TVK-TTerraVest Capital Inc $14.40
TRI-TThomson Reuters Corp $103.09
TIH-TToromont Industries Ltd $72.20
TA-TTransAlta Corp $9.31
RNW-TTransAlta Renewables Inc $16.14
UNS-TUni-Select Inc $11.83
VCM-TVecima Networks Inc $10.46
WJX-TWajax Corp $15.85
WCN-TWaste Connections Inc. $128.22
WFT-TWest Fraser Timber Co Ltd $61.85
WPK-TWinpak Ltd. $49.38
Y-TYellow Pages Ltd $9.97
Negative Breakouts
BBD-B-TBombardier Inc $1.12
CG-TCenterra Gold Inc $9.46
EQB-TEquitable Group Inc $107.93
IMG-TIAMGOLD Corp $3.94
ISV-TInformation Services Corp. $14.61
SCL-TShawCor Ltd $11.68
SYZ-TSylogist Ltd. $8.90
VMD-TViemed Healthcare Inc. $7.18

Source: Bloomberg

Report an editorial error

Report a technical issue

Editorial code of conduct

Tickers mentioned in this story

Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 28/03/24 0:13pm EDT.

SymbolName% changeLast
PPL-T
Pembina Pipeline Corp
+0.19%47.7

Follow related authors and topics

Authors and topics you follow will be added to your personal news feed in Following.

Interact with The Globe