Canadian investors are searching for reliable stocks to hold in their Tax Free Savings Accounts (TFSA).

Let’s take a look at Telus Corporation (TSX:T)(NYSE:TU) to see if the communications provider deserves to be a top pick.


Telus just reported steady Q2 2016 results. Consolidated operating revenue came in at $3.1 billion, up 1.5% compared with the same period last year. Adjusted EBITDA rose 4.3% to $1.2 billion and adjusted net income was $415 million, up 2.2% from Q2 2015.

The growth is the result of higher wireless and wireline revenue, as well as improvements made to operational efficiency.

Wireless network revenue rose 2.6% to $1.6 billion in the second quarter, driven by an increase in data revenue due to subscriber growth. Telus added 61,000 net new wireless customers compared with Q2 last year.

The company continues to keep its churn rate under 1%, and blended average revenue per user (ARPU) rose 1.4% to $64.38. Telus has increased ARPU for 23 straight quarters on a year-over-year basis.

Wireline revenue increased $14 million to $1.4 billion in the second quarter of 2016. Data service and equipment revenue drove most of the gains, rising 6.7% on a year-over-year basis.

Telus added 18,000 net new high-speed internet customers in the past 12 months and 13,000 additional Telus TV subscribers.

Overall, the company delivered solid results and continues to add new clients at a healthy clip.

Dividends and share buybacks

Telus is very generous when it comes to sharing profits with shareholders. The company spent $61 million in Q2 on share buybacks and paid out $261 million in dividends.

Management just raised the quarterly distribution from $0.44 to $0.46 per share. At the current price the stock yields 4.2%.

Is this a good TFSA pick?

Telus has enjoyed a nice rally since January and is trading above its long-term price-to-earnings (P/E) average, so the stock isn’t a bargain at the current price.

What’s the risk?

As long as interest rates remain under pressure, the higher P/E ratio is probably sustainable. If rates start to edge up, dividend stocks like telecoms and utilities could come under pressure.

In the near to medium term, interest rates are unlikely to rise very much. In fact, the next move in Canada could be another cut, so I don’t think there is significant downside risk for the stock at this point.

I wouldn’t buy today in the hopes of big price gains, but Telus offers a reasonably safe place to park some cash and collect a decent yield. If you want a reliable dividend-growth name that won’t keep you up at night, Telus remains an attractive pick.

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Fool contributor Andrew Walker has no position in any stocks mentioned.