An Undervalued High-Yield Growth Stock Hidden in Plain Sight

Shaw Communications Inc. (TSX:SJR.B)(NYSE:SJR) is a disruptive force with a promising growth profile and a fat, growing dividend yield. Here’s why now may be the time to load up.

| More on:

High yield and growth are seldom descriptions that are used to describe a single stock. When most think of high-yield dividend stocks, they think of boring, slow-growth stalwarts whose best days are already in the rear-view mirror. This is usually the case, but not always.

There are high-yield stocks out there that can cater to your income needs in addition to spicing up your portfolio with some growth. These stocks are perfect additions to your portfolio, regardless of whether you’re a retiree who needs the dividend payments, or a young, growth-hungry investor who’s looking for the next big disruptor.

While getting the best of both worlds (high dividend yield and a long growth runway) may seem like you may need to elevate your risk profile, in some cases, you may not to take on any additional risk when compared to your average blue-chip stock.

Consider Shaw Communications Inc. (TSX:SJR.B)(NYSE:SJR), a large telecom firm that’s a household name for many Canadians. The company has been shying away from the wireless space, while the Big Three incumbents reaped the rewards from their virtual monopoly over the Canadian market for many years.

Freedom Mobile: A huge disruptive force that keeps getting stronger

Going forward, wireless competition is going to heat up as Shaw’s wireless business Freedom Mobile starts to disrupt the Big Three’s market dominance. Shaw has been investing heavily in Freedom Mobile and has been taking steps to make the wireless provider more attractive to the average Canadian wireless user. That means a solid quality network at an affordable price — an option that Canadians have lacked for far too long.

Although Freedom Mobile hasn’t yet launched shares of SJR.B into the stratosphere, there are still many reasons to be bullish on Shaw and its wireless business. Freedom Mobile continues to improve its network, and its lineup of smartphones is expected to continue to grow. Over the next five years, I believe Shaw will gradually steal market share away from the Big Three incumbents, and that means Shaw’s wireless segment will experience a huge amount of growth, which will spark very generous dividend increases.

BlueSky TV: Reinventing the TV viewing experience

It’s not just Shaw’s wireless business that’ll be hot over the next few years. Shaw has also beefed up its cable TV business with BlueSky TV, a game-changing technology which allows users to speak to their TVs through their remotes. When bundled with its attractive internet services, Shaw’s BlueSky TV packages are simply must-haves for many Canadians, both for the value and the innovation.

At a time when customers are cutting the cord, Shaw has turned things around with its BlueSky TV offering. Shaw isn’t shying away from tech, which has reinvigorated its cable business. Shaw’s peers continue to see continued weakness in the segment.

Bottom line

Shares of SJR.B currently offer a bountiful 4.14% dividend yield, which will likely grow by leaps and bounds over the next five years. The stock trades at a 26.15 price-to-earnings multiple, which may seem expensive for a telecom, but it’s important to remember that Shaw is a disruptor that will be stealing a tonne of business from its competitors. That’s a gigantic opportunity that I believe deserves an even larger premium, so, at current levels, I think Shaw is a growth stock with a dirt-cheap valuation and an attractive margin of safety.

Shaw is going to bring the pressure to the Big Three, and I believe they’ll be incredibly successful over the next few years. Shaw’s larger peers are already starting to feel the pressure, and I think investors will jump over to Shaw from their original wireless or cable providers because the value is just too good to pass up.

Stay smart. Stay hungry. Stay Foolish.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Joey Frenette owns shares of Shaw Communications Inc.  

More on Dividend Stocks

Businessman holding tablet and showing a growing virtual hologram of statistics, graph and chart with arrow up on dark background. Stock market. Business growth, planning and strategy concept
Dividend Stocks

TFSA Magic: Earn Enormous Passive Income That the CRA Can’t Touch

If you're seeking out passive income, with zero taxes involved, then get on board with a TFSA and this portfolio…

Read more »

Man with no money. Businessman holding empty wallet
Dividend Stocks

2 Stocks Under $50 New Investors Can Confidently Buy

There are some great stocks under $50 that every investor needs to know about. Here’s a look at two great…

Read more »

think thought consider
Dividend Stocks

Down 10.88%: Is ATD Stock a Good Buy After Earnings?

Alimentation Couche-Tard (TSX:ATD) stock might not be the easy buy-case it once was. Here’s a look at what happened.

Read more »

money cash dividends
Dividend Stocks

TFSA Dividend Stocks: Earn $1,200/Year Tax-Free

Canadian stocks like Fortis are a must-have in your portfolio to earn tax-free yields for decades.

Read more »

sale discount best price
Dividend Stocks

1 Dividend Stock Down 11 Percent to Buy Right Now

Do you want a great dividend stock down 11% that can provide years of growth potential? Here's one heavily discounted…

Read more »

Growth from coins
Dividend Stocks

1 Grade A Dividend Stock Down 11% to Buy and Hold Forever 

If you're looking for the right dividend stock at the right price, you're going to want to consider this insurance…

Read more »

Target. Stand out from the crowd
Dividend Stocks

2 Dividend Stocks to Double Up on Right Now

Are you looking for dividend stocks to buy right now? Here are two top picks!

Read more »

edit Taxes CRA
Dividend Stocks

Tax Time: How to Keep More of Your Money

Nearly everyone hates paying taxes, although Canadians can lessen the financial pain with the right tax strategies.

Read more »