Gordon Pape Rogers has never been very generous with its shareholders. It hasn’t raised its dividend since March 2019 and currently pays only 50 cents per quarter ($2 per year) to yield 3.1 per cent. Plus, the stock is trading at below its price in January 2019. No capital gain in four years? A stingy dividend? Let’s look at two other telecoms recommended by my Internet Wealth Builder newsletter and see if we can do better.
Telus Corp.
Background: Telus Corp. is Canada’s second-largest wireless telecom company after Rogers Communications Inc. Its core business includes internet and mobile phone service through the Telus and Koodo brands. It recently spun off Telus International, which provides IT and customer service. It is using that as a model to grow its healthcare and agriculture businesses with an eye to spinning them off as well.
Performance: The stock is interest sensitive. As a result, it has been on a downward trend since touching an all-time high of $34.65 last April.
Recent developments: Telus continued its strong growth pattern in the third quarter. The company reported total Mobile and Fixed customer growth of 347,000. That was up 27,000 over last year and was its strongest quarter on record.
Mobile phone net additions were 150,000, a 15,000 increase over the prior year and the best quarterly result since 2010. Telus also reported record high connected device net additions of 124,000, up 14,000 year-over-year.
Telus reported third quarter income of $4.7-billion, an increase of 9.9 per cent over $4.3-billion in the same period last year. Adjusted net income was $471-million (34 cents a share, basic). That compares to $392-million (29 cents a share) in 2021. On a per share basis, the increase is 17.2 per cent.
Adjusted EBITDA was $1.7-billion, up 10.7 per cent from last year. Free cash flow was $331-million compared to $203-million a year ago, an increase of 63.1 per cent.
The company also reported good results from Telus International and subsequently announced it has acquired 1.4 million additional shares in the spin-off company.
“Our purchase of additional shares of Telus International reflects its importance to Telus, and our strong belief that this represents an attractive investment opportunity, particularly at current share price levels,” commented CEO Darren Entwistle. “The purchase of these shares is also reflective of the compelling prospects and robust profitable growth trajectory of the Telus International organization, benefitting from the significant synergies across the Telus business, particularly Telus Health and Telus Agriculture & Consumer Goods.”
Dividend: Telus announced a 7.2-per-cent increase in the quarterly dividend, to 35.11 cents ($1.4044 a year), effective with the December payment. The stock yields a very attractive 5 per cent at the current price.
Outlook: The company’s growth rate is impressive, and the likely future spin-offs of the health and agriculture units should benefit shareholders. The stock looks extremely oversold at the current price.
If you can only choose one for your portfolio, I’d give the nod to Telus. The yield is lower than BCE, but its health and agriculture operations will likely lead to profitable spin-offs.