Thursday’s TSX breakouts: This stock has strong downside protection and 3.4% yield

On Wednesday, the TSX index was relatively unchanged, closing down just 2 points. Within the index, 104 stocks advanced, 124 declined and six stocks were flat.

Today, there are 46 securities on the positive breakouts list (stocks with positive price momentum) and five stocks on the negative breakouts list (stocks with negative price momentum).

Discussed below is defensive utility stock, Hydro One Ltd. (H-T).

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

The company

Toronto-based Hyrdo One began trading on the Toronto Stock Exchange in November. The company provides electricity to more than a million customers and is the province of Ontario's largest electricity distributor.

Dividend policy

The company pays shareholders a quarterly dividend of 21 cents per share, or 84 cents on a yearly basis. This equates to an annualized yield of 3.4 per cent.

Valuation

The stock appears fully valued at current levels. According to Bloomberg, the stock is trading at a price-to-earnings (P/E) multiple of 19.7 times the 2017 consensus estimate. Fortis, a comparable utility company, trades at a P/E multiple of 16.8 times the 2017 consensus estimate. The premium to Fortis has widened over the past few months.

Analysts' recommendations

According to Bloomberg, the one year price target is $24.70, which is based on three buy recommendations and seven hold recommendations. This suggests the share price is currently fairly valued.

The consensus earnings per share estimate is $1.18 in 2016, rising 6 per cent to $1.25 in 2017.

Chart watch

The stock has a limited trading history as it just began trading on the Toronto Stock Exchange seven months ago, on November 5. That being said, the stock chart is positive. The initial public offering price was $20.50, and the stock has appreciated 20 per cent since then.

There is strong demand for this stock. On Tuesday, over 13 million shares traded hands, with the stock advancing slightly. This is well above its two-month average daily trading volume of 2 million shares.

This defensive stock has solid downside support, initially around $24, which is near its 50-day moving average (at $23.78), and failing that around $23.

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.