RE:Bnn's Market Call Telus (T TSX)
Telus is the highest quality telecom business in Canada and currently offers a yield of 7.3 per cent - very elevated relative to the ten year average yield of five per cent it has typically traded at. Not only do we believe this dividend is secure, but we also believe it will continue to grow at a faster pace than the dividends paid by Canada’s other telecoms. This belief was validated by its decision last month to increase the dividend 3.4 per cent on top of the 3.5 per cent hike back in March. All the telecoms should face easier earnings comparisons in the coming quarters as they lap the price war that started a year ago to the determinant of the overall industry profit pool. All the telecoms should also benefit from macro and money flow tailwinds from income hungry Canadian investors realizing that their GICs are rolling over at three to 3.5 per cent versus five to 5.5 per cent a year ago. Telus, in particular, is advantaged by its ownership of some faster growing non-telecom businesses, by its financial strength and flexibility as well as by its operational focus while its rivals are distracted integrating their recent acquisitions. Lastly, we believe Telus has some intriguing unpriced catalysts in front of it, including a plan to monetize $3 billion plus of surplus urban real estate via re-development into high rise housing.
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