Investors have long known of the benefits of investing in Telus Corporation (TSX:T)(NYSE:TU). As Canada’s third-largest telecom player, Telus has a sizable subscriber base which provides a healthy stream of revenue.
But is that enough to continue to see Telus as a great investment? Here are but a few reasons why the answer to that question is, without a doubt, yes.
Dividend growth
It would be impossible to lay out a case for investing in Telus without mentioning the dividend. The current $0.48 quarterly dividend pays a very impressive 4.48% yield and has steadily increased over the past few years, including a $0.02 increase in January of this year as well as an additional $0.02 increase announced last month, which will be payable in January 2017.
That dividend is set to continue increasing as well. Management has reiterated that investors should expect between 7-10% growth of that dividend over the next few years. While some may be skeptical over whether or not this is attainable, just keep in mind that a decade ago Telus’s dividend stood at $0.018, and a similar conversation was made over whether or not long-term dividend growth was sustainable.
In terms of a payout level, Telus maintains a level below 70%, which not only keeps the payout in line with room for growth, but also provides a healthy buffer.
Value and customer growth
From a share-price perspective, Telus has engaged in a number of share-buyback programs in the past, all of which have given a boost to the share price. By way of example, at the close of 2012 there were 655 million shares outstanding. At the start of this year, there were approximately 600 million shares outstanding, and moving into 2017, that figure is likely to continue moving south to 590 million.
Moving past value and dividends, another key point to mention when considering Telus is growth. Telus continues to be the fastest-growing telecom in the nation. In the most recent quarter, Telus added 115,000 net customers across the wireless, internet, and TV segments, representing a 23,000 increase over the previous quarter.
The wireless segment continues to lead the way, accounting for 87,000 of the new additions in the quarter and maintaining the best churn rate in the industry of just 0.94%. From a continuity perspective, Telus has maintained a churn rate below 1% for 12 of the past 13 quarters.
Results that show promise
In the most recent quarter, Telus continued to demonstrate some growth, albeit at a slower pace. Revenue for the quarter came in at $3.2 billion, representing a 2.6% increase over the same quarter last year. EBITDA also came in higher at $1.131 billion–5.8% over the same quarter last year.
Adjusted basic earnings per share came in at $0.65 per share–$0.01 lower than what was posted in the same quarter last year. Free cash flow also saw a significant drop to $98 million from the $310 million posted in the same quarter last year. Much of this drop can be attributed to customer-retention programs put in place as well as the results of the economy slowdown in parts of the country.
Despite the slowdowns, the company continued to provide ARPU growth of 3.8% to $66.67, representing the 24th consecutive quarter of year-over-year growth.
Telus is a great investment
Telus remains, in my opinion, a great long-term investment opportunity. While growth may have slowed, the company’s commitment to increasing shareholder value, steadily growing dividends, and overall positive results make it one of the better options on the market for those investors looking for income and growth over the long term.
