Telus Corporation (TSX:T)(NYSE:TU) has been virtually flat for the last two years and underperformed its peers in the Big Three telecoms by a landslide. Telus is a terrific telecom company that is growing a lot faster than its peers and has been doing so with customer satisfaction in mind. Telus now is the most inexpensive telecom stock and could be poised to outperform as we head into the latter part of 2017.
Telus has a terrific track record of returning wealth to shareholders
Telus pays a very generous dividend which currently yields a bountiful 4.4%. The company has grown this dividend by leaps and bounds over the last decade; a dividend increase occurred each year, even during the Great Recession. The magnitude of these dividend increases is also quite impressive as the company was able to increase the dividend by double digits each year.
The company has a payout ratio of 75.9%, which is quite low considering the fact that most telecoms pay a majority of their net income in the form of a dividend. This payout ratio is considerably lower than the industry average and leaves the company well positioned for growth as well as future double-digit dividend increases.
Telus also has a very aggressive share-buyback program. The company bought back a whopping 15.6 million common shares for $2.5 billion as a part of its share-repurchase plan which concluded last year. We can expect more buybacks of a similar magnitude over the next few years.
There’s no question that shareholders in the stock will be rewarded in the long run.
Deep value offered at current levels
The stock has gone nowhere over the last two years and has become one of the biggest losers in the Canadian telecom space during this time. Telus is a dividend-growth king that is very well positioned to grow its dividend by a huge amount in the next decade. The stock is trading at a huge discount to its intrinsic value and offers a huge margin of safety at current levels. If you’re an income investor looking for dividend growth at a fair price, then look no further than Telus.
The stock currently trades at a forward price-to-earnings multiple of 14.6, which is a lot cheaper than the company’s five-year historical average multiple of 17.4. The dividend yield is also considerably higher at 4.4% than the company’s historical average yield of 4%.
The company’s focus on customer satisfaction will do wonders for its customer-retention rate, and this is incredibly important if the company is to grow its subscriber base. Telus is a very strong dividend-growth stock that is extremely undervalued. Foolish investors should seriously consider adding this forever stock to their portfolios while the stock is still cheap.
Stay smart. Stay hungry. Stay Foolish.
Renowned Canadian investor Iain Butler just named 10 stocks for Canadians to buy TODAY. So if you’re tired of reading about other people getting rich in the stock market, this might be a good day for you. Because Motley Fool Canada is offering a full 65% off the list price of their top stock-picking service, plus a complete membership fee back guarantee on what you pay for the service. Simply click here to discover how you can take advantage of this.
Fool contributor Joey Frenette has no position in any stocks mentioned.