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Telus Corporation Is an Absolute Steal at Current Levels

Telus Corporation’s (TSX:T)(NYSE:TU) stock has flatlined for the last two years. The company currently offers an attractive 4.5% dividend yield and a considerable amount of upside from its growth initiatives. Telus currently has the highest dividend-growth rate of the Big Three, and the stock looks to be trading at a huge discount to its intrinsic value.

Underwhelming Q4 results could be a buying opportunity 

Telus reported its Q4 2016 results earlier this month, and it was quite underwhelming; the company missed on the top and bottom line, despite growing its customer base. Adjusted EBITDA, excluding restructuring costs, increased by 3.7% to $1.11 billion, which was lower than analyst expectations of $1.122 billion.

Telus added 127,000 new customers in its postpaid wireless, internet, and TV segments. Total wireless subscribers are at 8.6 million, which is a 1.5% increase year over year.

Looking forward, the company sees its EPS between $2.49 and $2.64 for 2017, which is slightly less than the original $2.78 consensus.

The stock fell by 1.4% after the earnings announcement; I believe the drop is unwarranted because Telus is seeing subscriber gains across the board. Sure, the company is spending a lot of money to grow its subscriber base, but I believe it’s worthwhile, especially considering the fact that Shaw Communication’s Freedom Mobile may become a real threat to the subscriber bases of the Big Three incumbents over the next few years.

Subscriber churn has been under 1% for 13 out of its last 14 quarters, which is a great sign that customers are happy. Telus has been known to have one of the best customer-service experiences out of all the telecoms. This will be a trait that will allow Telus to avoid significant subscriber losses to Freedom Mobile and the other Big Three incumbents over the long term.

What about value?

There’s a chance that shares of Telus could pull back even further, and investors should load up on shares on any signs of weakness. The stock currently trades at a price-to-earnings multiple of 18.1 and a 3.1 price-to-book multiple, both of which are in line with the company’s five-year historical average values of 17.4 and 2.8, respectively.

The dividend is also considerably higher at 4.5% than the historical average yield of 4%. Investors can expect consistent annual dividend increases each year going forward, so if you’re a long-term income investor looking for an attractively valued defensive dividend-growth king, then look no further than Telus Corporation. It’s a fantastic stock that you can buy now and hold for many decades.

Stay smart. Stay hungry. Stay Foolish.

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Fool contributor Joey Frenette has no position in any stocks mentioned.

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