Telus Corporation (T) Dividend Stock Analysis

Telus is the 3rd largest telecom in Canada after Bell Canada and Rogers Communications. It is also over 100 years old. I was quite surprised by this fact to be honest.  Back in 1885, it made the first phone call between Fort Edmonton and St. Albert in Alberta. Telus went on to become the phone company for Alberta with provincial ownership at first. Over the years, it became a fully publicly traded company with no provincial ties and it merged with BC Tel. In 2001, Telus started buying assets in Quebec by capturing Quebec Tel and other assets.

I am unsure of their plans for growth in Quebec. Videotron would have been a nice catch but it was snatched up by Quebecor Media.

Wireless revenu represents 52% of their overall revenue with wireless voice at 40% and wireless data at 12%. Their long distance is now at 5% while their internet (wireline data) is at 23%. Leaving 20% for regular phone business and others.

Quick Facts

• Stock Ticker: T on TSX and TU on NYSE
• Market Cap.: 16.16B$
• P/E: 15.48
• Forward P/E: 12.69
• EPS: $3.22
• Beta: 0.18
• Liabilities to Equity Ratio: 1.40
• Quarterly Dividends: $0.525
• Dividend Yield: 4.21%
• Dividend Payout Ratio: 61.92%
• ROE: 14.74%
• 5 Year EPS Growth Average: 27.15%
• 5 Year Dividend Growth Average: 19.32%
• 52-Week Low: $36.93
• 52-Week High: $50.28
• 52-Week Range: 9.15%

Telus has had a nice run this past year. I am not sure how much longer this run can keep on going. At some point, the price point will move above its value. For now, it's P/E is is slightly above average within its peers. Only Shaw and Manitoba Telecom trade at a higher premium so far.

It's free cash flow was hurt in 2008 and dropped to $368 millions from $1.3 billions but it is recovering as 2010 had a free cash flow of $947 millions.  On the other hand, it's customer base continues to grow year after year proving they have a solid acquisition strategy.



For the past 5 year, Telus had a pull back like the rest of the stock market back in 2008 and it stil has not reach its pre-2008 high. I am not sure when looking at the sales graph and the current P/E that a price above $50.00 consists of a value play.

Dividend Growth

Dividends were hurt for a while and it definitely doesn't look like the type of historical dividends a dividend investor is looking for. However, I have to take into consideration how the telecoms have had to change over the past 5 years and the role they now play in our day-to-day life.

Dividend Payout Ratio

Same story here, as the company re-invented itself with stronger infrastructure, the payout ratio was higher and it is now within a good range for the payout ratio. Investment in technology and infrastructure to stay competitive should see the ratio go up but it should also translate in retained customers and business. What I would like to see is a continued growth in wireless network improvements and fiberoptic lines where spending is gradual to keep up with growth.

EPS Growth

Not the most consistent but not the worst either. So far, I have not seen a Canadian telecom with consistent EPS growth. The competition amongst them is probably doing a bit of a tug of war.

However, If you were to take a look for 2003 forward, the picture looks really nice across the board and shows a lot of promise and confidence in the execution of the management team.

Thoughts

One thing I have learned about the telecommunication companies is that wireless and internet are the new business and mainstream media are being redirected. It's changing the landscape for advertisement revenue and we are in a situation where developed countries are developing habits where they need to be connected at all time. Who is profiting?

I am not a big fan of Telus and their long contracts but they have made an amazing entry into the cable business with their cable over internet. That phone line sure is carrying a lot of data. I also hear amazing thing from the condo owners who have fiber optic lines with Telus in their building. It feels like Telus has one-up Shaw Communications on the west coast for now.

Full Disclosure: Long T, BCE, RCI.B, AT&T

Disclaimer: The material presented should not be considered a recommendation. You should always do your own research and reach your own conclusion.

 

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