For the month of November, I wanted to take a look at another great Canadian Dividend Stock. I’ve already told you how much I love Canadian Banks (even if you are a US investor!). Today, I’ll tell you why Canadian Telecoms should also be part of your portfolio.

Telus (T) Description

Telus is one of the telecommunications leaders in Canada. They have been making extensive investments in both Wireless and Wireline platforms. Telus offers residential phone, internet, TV and mobile phone services. Back in 2008, Telus also bought Emergis, a leading electronic healthcare solutions provider and then created Telus health Solutions. With an aging population, healthcare is definitely a great sector for a telecom. Considering the number of wireless subscribers, Telus is the 3rd largest provider in Canada. Interesting enough, T is gets 49% of its revenue from Wireline and 51% from Wireless.

Telus (T) Stock Graph

 TSE: T

 

Telus (T) Metrics

 

Ticker
T CN Equity
NameTELUS Corp
Dividend Metrics
Current Dividend Yield4.25
5 year Dividend Growth14.34
1 year Dividend Growth10.26
Company Metrics
Sales Growth (1 year)1.8
Sales Growth (5 year)3.52
Earnings growth3.88
P/E ratio14.68
Margins growthN/A
Payout ratio62.09
Return on Equity13.14
Debt to Capital Ratio0.41
Price54.62
Trading Volume942587.7

Telus (T)  Upcoming opportunities and dangers

 

Canadian banks and telecoms share one point in common and it is with regards to competition; they don’t have many competitors. The heavy start up costs mixed with solid existing players make it very difficult for any firm to enter. Telus’ biggest competitors are Bell (BCE), Shaw Communications (SJR.B) and Rogers Communications (RCI.B).

 

However, a small number of competitors in a technology field requires important investments to keep their market share. In 2009, Telus partnered with Bell to develop the HSPA + network. This ensured both T and BCE a higher penetration in the smartphone industries. Since kids as young as 12 are now looking to get an iPhone, I can see that both companies made a smart move.

 

Telus strongholds (BC and Alberta) have been spared from heavy competition so far, which enabled Telus to concentrate on expanding and battling on their competitor’s playgrounds (like Ontario and Quebec). However, Shaw is expected to attack Western Canada within a few years.

 

Finally, Telus EPS was reduced since  the 2008 crisis (from $3.79 in 2007 to $3.52 in 2008, $3.14 in 2009) but is deemed to go back on an uptrend in the upcoming years ($3.23 in 2010, $3.85 in 2011 (estimated) and up to $4.15 in 2012 according to financial analysts).

 

Final Thoughts on Telus (T)

 

As you can see, Telus won’t beat any growth records in 2012 since it is evolving in a highly competitive and mature market. However, its solid financial situation combined with the management team’s will to increase its dividend by 10% in 2012 and 2013 makes it an interesting bid. Telus dividend payout ratio enables it to both distribute a higher dividend and massively invest in R&D in order to keep its market share and remain a leader in its industry.

 

This is the main reason why I’ve added Telus to my dividend holdings. Since I bought it this summer, the stock is stable (no loss, no gain) but I’m entitled to get a 4% dividend yield ;-).

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13 Comments   |  

13 Comments

Michel
November 10, 2011, 5:31 am

Good review. If I’m going to hold one telecom, I think it is BCE. Larger company and higher dividend. What are your thoughts?

Mike
November 10, 2011, 12:09 pm

hey Michel,

it’s coming in a few weeks actually, I wanted to compare BCE to Telus ;-D

November 10, 2011, 5:53 pm

[…] Dividend Guy Blog provided readers with a dividend stock analysis of Telus. […]

November 11, 2011, 4:02 am

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November 13, 2011, 9:06 am

I just wanted to comment on Shaw and Western Canada, as what you indicate will be taking place in the future is actually somewhat incaccurate (and please bear in mind, I am an employee of TELUS, so feel free to take what I say with a grain of salt)

Shaw has cancelled their plans to launch wireless, and they are now losing market share to TELUS in Western Canada on the television side, which is where they used to be able to effectively compete. TELUS recently launched Optik, which is a fibre to the home solution, in Western Canada, which has been increasing the wireline side of the business, while wireless continues to grow. Stating that Shaw intends to attack the market in the next little while presumes they were not in a position to compete before, which is the position TELUS used to be in as it did not have a TV offering. Unlike Shaw, TELUS now has an all communications package to offer the region, which they have been using to pressure Shaw’s previously dominant stance in the TV market. Shaw is now facing competition that didn’t previously exist in that market, TELUS now does not have Shaw as a potential competitor in wireless.

November 13, 2011, 10:55 am

[…] Telus T Dividend Stock Analysis @ The Dividend Guy […]

Mike
November 13, 2011, 12:29 pm

@Neu,

thank you for your feedback. I actually got my information from early 2011 stock analysis from a financial analyst so I though that my source was accurate. Can you tell me when Shaw has decided to not attack Western Canada?

November 13, 2011, 1:58 pm

Shaw has been the ‘incumbant’ television provider in Western Canada for a good decade or so, and about 4-5 years ago launched Shaw Digital Phone, which really dug into the TELUS wireline profits. Everything ‘stabilized’ so to speak around 2009-2010 with Shaw having captured the ‘low hanging fruit’ for phone, and TELUS having managed to maintain its presence as the largest provider in Western Canada for wireless. EVERYONE thought Shaw was going to launch a wireless product in 2010-2011, and TELUS was aiming to launch its fibre to the home project in the same time frame in order to be able to compete on even footing.

Well, that ALL changed. TELUS launched Optik, which has been hammering Shaw’s television market and gaining back phone subscribers for TELUS. In the meantime, Shaw announced back on September 1st that they were cancelling their wireless launch plans (article on it can be found here http://www.cbc.ca/news/technology/story/2011/09/01/shaw-wireless.html).

This shocked a lot of people (myself included) because Shaw has already poured about a half billion dollars into buying spectrum and building out network, and essentially it’s all disappeared into thin air. Now they have no means of providing a ‘all in one package’ in western Canada (no internet, TV, phone, wireless package), and their ‘replacement’ plans have no immediate recognizable monetary value (they plan on going with wireless access points, which no provider has been able to monetize on in any meaningful way). If Shaw has any plans to attack western Canada’s market with something new, it’s nothing anyone is aware of at this point. Shaw’s stock has suffered a bit as a result as well (it’s down about $2 from where it was before their announcement).

November 13, 2011, 2:00 pm

Oh, also not sure if you were aware, TELUS raised its dividend again last quarter, and has announced that it plans to raise the dividend 10% per year through 2013. I’ve never been happier to be an employee and enrolled in our stock program :)

Mike
November 13, 2011, 2:11 pm

Thx for the additional info Neu!

I mentioned the dividend raise in my last paragraph. this is great news for investors (and employees ;-) ).

November 22, 2011, 11:08 am

I like Telus as well over Shaw. The competition is fierce between Shaw and Telus. Both of them vying for the tripple service (TV, Internet & Phone). Lots of perks up front like Xbox 360 and such. I am still using Shaw though because there is no contract :) Telus requires a 3 year contract and I have not found Telus to offer me a lower cost alternative as a consumer.

Telus is strong with wireless and it’s more than 50% of their revenue. It’s similar with BCE and Rogers if you look closely. That means Shaw is losing on the really profitable segment and trying to hold what they have. I have not used Telus for years now because I wasn’t impressed with ADSL when I first tried it but many are switching over to optik now. It just takes time to build an infrastructure though so over time Telus will probably do well with optik just like BCE and Rogers are building optic infrastructure back east as well. Last year, I looked at the drivers for profitability, if I am permitted, here is a link (http://www.thepassiveincomeearner.com/2010/07/the-telecoms-road-to-profits.html)

Disclaimer: I own Telus, BCE and Rogers.

November 23, 2011, 10:15 am

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November 25, 2011, 11:41 am

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