Telus Corporation (TSX:T)(NYSE:TU) represents a unique opportunity for investors. The telecom behemoth may not be the largest of the three big companies that are commonly referred to as “RoBelUs,” but what Telus does offer may be of some surprise to investors.
Here’s a look at what makes Telus a great investment option.
Telus has a promising dividend
Telus offers a quarterly dividend of $0.48 per share, which equates to a respectable 4.45% yield. Most investors don’t realize how much the company has raised the dividend over the past decade.
Back in 2007, the dividend stood at just $0.18 per share; the company has steadily raised the dividend since then, including 10 increases in the past five years alone.
Critics of Telus often note the fact that Telus has a declining cash flow, at least when comparing the past few years. While that much is true, and that cash generation is key to sustaining a dividend, the growth should also be brought into perspective, as it could provide a vehicle for significant revenue and make the current declining cash flow nothing more than a brief event.
In the most recent quarter, Telus noted that much of that decline in cash flow was due to higher capital expenditures associated with upgrading and deploying the Telus network, including work on 5G connectivity.
Telus continues to offer growth
Telus is often cited as the fastest-growing telecom in the country, and for good reason. Telus has the lowest churn rate of any of the Big Three, maintaining a rate below 1% for over 13 quarters. Similarly, Telus has steadily increased the ARPU over the last few quarters, most recently hitting $66.24 — the 25th consecutive quarter of year-over-year growth.
The recently approved sale of Manitoba Telecom Service to BCE Inc. had a provision to sell approximately one-quarter of all MTS contract customers to Telus, along with 13 dealer locations, in a deal that was worth $300 million. The added customers as well as greatly increased service to Manitoba will likely provide an avenue of growth for Telus over the next few years.
One area that is often not mentioned enough with respect to Telus is how the company is at the forefront of the evolution of the IoT movement. The IoT, or Internet of Things, is the concept that everyday devices are connected to the internet, allowing for a steady stream of updates, diagnostics, and information to flow seamlessly to us and between devices.
As a consumer, this is the revolutionary step to transforming our world to something we see in science fiction movies, such as watches that can make calls, coffee machines that can start brewing a pot of coffee when you get out of bed, and lighting systems that can be voice activated.
Telus is embracing this change and is likely to benefit greatly from it. Telus was one of just nine mobile network operators across the world that confirmed support for the new LTE-M standard for communicating with IoT devices.
Simply stated, this new standard will allow IoT devices to connect using LTE networks quicker, with less battery drain, and less strain on networks. Telus announced plans to launch or expand LTE-M service sometime in 2017.
In my opinion, Telus remains a great investment opportunity. While the current cash flow does raise some concerns, the continued growth of the company as well as investments in next-generation connectivity and IoT solutions will help propel the company to new highs.
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Fool contributor Demetris Afxentiou has no position in any stocks mentioned.