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Copa Shapes Base, May Add Handle

By: Investor's Business Daily
Posted: 6/25/2012 6:00:00 PM
Referenced Stocks: ALGT;CPA;SAVE

Even though the market is again experiencing turbulence,Copa Holdings ( CPA ) is consolidating rather steadily.

The stock corrected 13% from its May peak, which fits the bill for a flat base. But the structure could also be a cup-type pattern.

In the current six-week-old pattern, Copa has managed to close near its highs in four weeks, which shows strength. Another positive is that the stock regained its 50-day moving average on Wednesday -- its busiest day of trading in more than a month.

Copa's Accumulation-Distribution Rating is a D, which is not ideal. But this gauge of institutional demand has improved from a worst-possible E earlier this month.

The airline industry group has cruised higher in recent months, thanks to sliding oil prices. In Monday's IBD, the group ranked No. 13 out of 197, up from 22nd three weeks ago. The group is up about 18% for the year, while oil prices have tumbled more than 20%.

Copa -- which is based in Panama and serves the Americas and Caribbean -- is not a lone ranger in the airline group.Allegiant Travel ( ALGT ) andSpirit Airlines ( SAVE ) are other highly rated stocks in the group.

The Panamanian air carrier has delivered profit growth each year since 2002.

Earnings have more than doubled since 2005. Since 2002, sales growth has mostly been in double-digits, but revenue fell 3% in 2009.

Copa has a three-year Earnings Stability Factor of 4, signaling a steady stream of profits. Analysts polled by Thomson Reuters see profit rising 13% to $8.01 a share this year. But the estimate has recently been lowered.

While most companies pay shareholder dividends on a quarterly basis, Copa does it only once a year. The company pays an annual dividend of $2.10 a share, which works out to an annualized yield of about 2.5%.

Its yield is among the highest of the seven dividend-paying companies in its group. The stock's yield is also roughly the same as that of the S&P 500.

The company has a policy to pay out up to 30% of its net income as dividends. But this can change depending on its liquidity needs.