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3 Reasons Telus Belongs in Your Portfolio

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.

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

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