The Motley Fool

Time for My Telecom to Pay Me

It’s that time of month again. Time to pay your cell phone and Internet bills. People can’t live without those things in this digital age. Well, you don’t have to be so depressed. There is a way to get back at your telecom. Instead of just you paying them, you can also get them to pay you.

Yes! You can become a part owner in a big telecom and get your dividend rights. Well, okay, there isn’t a contract saying that firms have to pay shareholders a dividend, but some companies have a culture of doing so, and they’re likely to continue doing that. The Big Three telecoms do.

Personally, Telus Corporation (TSX:T)(NYSE:TU) takes care of my Internet service, so I will use it as an example. The Internet plan costs $40 per month, which equates to $480 a year.

How do you get your telecom to pay your bills?

To get Telus to pay for my Internet bill, I find out what they pay in dividends. Currently, Telus’s quarterly dividend is $0.42 per share. Multiply that by four and the annual payout turns out to be $1.68 per share.

So, $480 divided by $1.68 implies I need at least 286 shares to pay my bill, excluding taxes. Remember, that’s a unique situation for every investor. At the closing price of $44.75 per share, those 286 shares equal to an investment of $12,796, assuming the transaction fee is $10.

But I don’t have $12,796

Now, $12,796 is a lot to come up with out of the blue. Investors who are tired of paying recurring bills, including bank fees, credit card fees, cable TV, dental cleaning, rent, mortgage, etc. should consider replacing those expenses bit by bit by buying ownership in dividend-growth companies that have a history of increasing dividends steadily over time.

Typically, these are companies that yield between 2-3% and have a history of growing dividends every year. Create a schedule that works for you. For example, every three months, invest $1,500 in such a company. You can start with Telus or other industry leaders.

Over time, the idea is to build a diversified portfolio to generate a stable, growing income stream to pay your expenses, piece by piece. It will start slow at first, but as you track your progress, you’ll see that it works.

In conclusion

It is not the best time to buy Telus. Historically, it has been a better investment opportunity when it yielded 4% or higher. For better value, start with the Big Five Canadian banks or the pipelines.

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Fool contributor Kay Ng owns shares of TELUS (USA).

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