3 Reasons to Invest in Telus Corporation Today

Telus Corporation (TSX:T)(NYSE:TU) represents an incredible long-term opportunity today.

| More on:
The Motley Fool

Telus Corporation (TSX: T)(NYSE: TU) is one of Canada’s “Big 3” telecommunications companies and it has been building wealth for shareholders since its initial public offering in 1990. Even though its stock has traded in the open market for 14 years now, it still represents an incredible opportunity today, so let’s take a look at the three top reasons you should initiate a long-term position today.

1. Admirable growth with tremendous upside potential

Telus has shown consistent growth over the last decade and this continued in its most recent earnings report. On August 7, the company released second-quarter results and it showed earnings per share increasing 41% to $0.62 and revenue increasing 4.4% to $2.95 billion.

Telus added 80,000 net new customers during the quarter and it now has approximately 7.9 million wireless subscribers, 1.4 million high-speed internet subscribers, and 865,000 television subscribers. Google estimates that Canada has a population of 35.16 million people, so there is still an immense amount of upside potential for Telus’ subscriber base.

2. Dedication to the shareholder

As Telus has continued to deliver subscriber, earnings, and revenue growth, it has also continued to increase its returns to shareholders. Many companies prefer reinvesting all of their cash into their business, but Telus has found a balance of reinvesting to stimulate growth while paying out billions of dollars in dividends. Here’s the total dividends paid per share by Telus since 2010, with the estimated payment in 2014.

Year 2010 2011 2012 2013 2014 (estimate)
Dividends Paid Per Share $1.00 $1.1025 $1.22 $1.36 $1.52

Source: Telus Corporation

In 2011, Telus stated that it planned to increase its dividend by more than 10% annually, through two dividend increases each year in May and November, and it has delivered on this promise. The company plans to continue doing this through 2016, but I think it could easily extend this plan for several more years, supported by continued growth and free cash flow generation.

3. An inexpensive valuation

Today, Telus’ stock sits about 8% below its 52-week high of $42.40 reached back in June, yields approximately 3.9%, and trades about 17.5 times trailing 12 months earnings. A multiple of 17.5 seems fair currently, but long-term investors care more about where the stock is going than where it is today and Telus trades at just 16.5 times fiscal 2014’s estimated earnings per share of $2.37 and only 14.9 times 2016’s estimated earnings per share of $2.61.

If the stock continued to trade at a fair multiple of 17.5, shares could trade upwards of $41 by the end of fiscal 2014 and over $45 by the conclusion of fiscal 2015, representing healthy gains from today’s levels and that is not including the added returns from reinvested dividends.

Is there a spot for Telus in your portfolio?

Telus Corporation is one of the most well run companies in Canada and its growth, dedication to shareholders, and the inexpensive valuation of its stock makes it one of the best investment opportunities in the market. Foolish investors seeking an investment in the telecommunications industry or those seeking growth paired with a high dividend should take a closer look and consider initiating long-term positions in Telus today.

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 Joseph Solitro has no position in any stocks mentioned.

More on Investing

Solar panels and windmills
Energy Stocks

How Brookfield Renewable Stock Gained 40% in a Month

Brookfield Renewable stock (TSX:BEP.UN) surged in share price from a landmark deal and strong earnings, leading to a 40% jump.

Read more »

money cash dividends
Dividend Stocks

2 Under-$10 Dividend Stocks I’d Buy Right Now

Here's why low-cost dividend stocks such as Decisive Dividend should be part of your shopping list in 2024.

Read more »

Canadian Dollars
Dividend Stocks

5 Stocks You Can Confidently Invest $500 in Right Now

These five stocks are all some of the top businesses in Canada, making them stocks you can buy confidently in…

Read more »

A worker drinks out of a mug in an office.
Dividend Stocks

Worry-Free Dividends: 3 Stocks for Canadian Investors

These three Canadian stocks can help you earn worry-free dividends irrespective of market conditions.

Read more »

movies, theatre, popcorn

Cineplex Stock Looks Like a Steal at $8 and Change

Cineplex (TSX:CGX) stock is starting to look like a great deal as it looks to add to its recent swing…

Read more »

Woman has an idea
Dividend Stocks

The Smartest TSX Dividend Stocks to Buy With $1,000 Right Now

Here's why blue-chip TSX dividend stocks such as BAM and BMO should be a part of your shopping list in…

Read more »


The Top 5 Movers on the TSX in May

If you're looking for the best of the best, these five have been the top performers in May of this…

Read more »

stock data
Dividend Stocks

TFSA Pension: 1 Great Canadian Dividend Stock to Own for Growing Passive Income

This TSX dividend stock is down 35% from the 2022 high. Is it finally oversold?

Read more »