3 Reasons Telus Belongs in Your Portfolio

The future looks bright for Telus. Here are 3 reasons you should consider owning this telco giant.

| More on:
The Motley Fool
You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn more

There are few businesses in Canada that are as attractive as our telecom industry. Although we’re always hearing threats of new, foreign-owned competition entering the market, nothing has yet to materialize.

While this is bad news for Canadian consumers, who pay some of the highest wireless rates in the world, it’s great news for investors in Canada’s largest telcos. Investors also love the growing dividends, the terrific margins, and the steadiness of the telecom business. We are collectively addicted to our smartphones, much to the delight of everyone who owns a telco share.

While both BCE (TSX:BCE)(NYSE:BCE) and Rogers Communications (TSX:RCI.B)(NYSE:RCI) are attractive investment options, my favorite Canadian telecom company is Telus. (TSX:T)(NYSE:TU) Here are three reasons why.

Growth in TV

Considering its strength in wireless and internet, many investors seem to forget about Telus’s TV offerings. Although Telus TV is still a distant third behind BCE and Shaw Communications (TSX:SJR.B), it has the potential to be a huge growth driver for the company going forward.

Telus reported growth of 22% year over year in television subscribers, to 774,000. Telus is quickly gaining market share in the west, buoyed by aggressive promotions and attractive pricing. Telus offers satellite TV across the country but only offers cable in B.C., Alberta, and Quebec, and only in larger centers in those provinces. Subscriber numbers should continue to tick up as it rolls out cable services across the country. There’s huge growth potential in Telus’s television offerings, and they could easily double over the next five years.

Share buybacks and dividend increases

Telus is returning cash to shareholders like crazy.

In 2013, Telus increased the quarterly dividend twice, upping it from 32 to 34 cents per share in Q1 and then upping it from 34 to 36 cents in Q4. It remains committed to increasing the dividend twice per year and at greater than a 10% annual rate. Considering the company is estimated to grow earnings 17% in 2014, this growth looks to be sustainable, at least in the short term.

Telus is also buying back its own stock aggressively. In July it announced a doubling of the initial $500 million share buyback program, spending $1 billion to buy back approximately 5% of its shares by the end of the year. Although Telus hasn’t yet announced a 2014 share buyback program, expect more of the same from the company. This should help increase the share price in the near term.

Wireless growth

Telus is perhaps the best positioned out of the big three telecom companies to grow its wireless base.

Thanks to spectrum acquisitions, Telus can now offer true nationwide wireless coverage, and that’s not even considering the results of the recent spectrum auction where the company spent $1.1 billion for some of the best assets.

Telus is also managing its wireless business well, posting better results in both ARPU (average revenue per user) and churn rates, meaning it kept more customers from jumping to a competitor. It also reported customer complaints declined for the second consecutive quarter, and is expected to benefit going forward from the introduction of true unlimited plans. Customers have been asking for these plans for years, so this should help retain current customers and add new users.

Foolish bottom line

Telus is growing its subscriber base, especially in television, which has huge growth potential going forward. It’s investing heavily in network upgrades, making sure all us smartphone addicts get our data slightly faster. ARPU keeps going up, and investors are even seeing growth in the wireline and internet divisions. Telus is well positioned for the future, and should reward investors accordingly.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Nelson Smith does not own shares in any of the companies mentioned.

More on Investing

Pixelated acronym REIT made from cubes, mosaic pattern
Investing

Beginner Investors: Get Passive Income by Investing in REITs!

You can get passive income by investing in REITs like Northwest Healthcare Properties REIT (TSX:NWH.UN).

Read more »

A close up image of Canadian $20 Dollar bills
Investing

3 Top Stocks You Can Still Buy for Under $20 a Share

While these three Canadian stocks trade undervalued and below $20 a share, they are easily some of the top investments…

Read more »

Dots over the earth connecting the world
Dividend Stocks

3 of the Top-Growing Stocks on Earth

Market volatility remains high in Q3 2022, but it’s easy to identify the top-growing stocks on Earth.

Read more »

Profit dial turned up to maximum
Dividend Stocks

1 Undervalued Canadian Dividend Stock to Buy for TFSA Passive Income and Total Returns

This cheap Canadian energy stock provides an attractive dividend yield for TFSA passive income and a shot at some big…

Read more »

money cash dividends
Dividend Stocks

Want Passive Income? 1 TSX Stock for $8/Day in Dividends

If you need cash right away, then this TSX stock can make you passive income from a stable dividend that…

Read more »

edit Balloon shaped as a heart
Dividend Stocks

My 3 Favourite TSX Dividend Stocks Right Now

Canadian dividend stocks make for great long-term buy-and-hold investments.

Read more »

value for money
Dividend Stocks

3 Incredibly Cheap Dividend Stocks to Buy for Dependable Passive Income

Now is an excellent time to load up on Canadian dividend stocks. Here are top picks that are all trading…

Read more »

A close up image of Canadian $20 Dollar bills
Dividend Stocks

3 Simple TSX Stocks to Buy With $25 Right Now

Canadians with capital of as low as $25 can purchase three simple stocks right now and earn recurring passive income…

Read more »