Telus Corporation (TSX:T)(NYSE:TU) released its third-quarter results on Thursday. Revenues for Q3 rose 4% to $3.3 billion, while net income of $367 million increased by more than 5%. The company’s per-share earnings of $0.62 also rose three cents from last year’s total of $0.59.
Let’s have a closer look at the results to see how Telus did in Q3 and if it is a good buy today.
Wireless subscriber growth remains strong
In its wireless segment, Telus had 115,000 net postpaid additions this quarter, a 32% increase over 87,000 from a year ago. It also had 9,000 net prepaid additions, which is up from a net loss of 7,000 a year ago. As a result of the subscriber growth, wireless revenues were up 6.1% and adjusted EBITDA also increased by 5.1%.
In its wireline division, Telus had 19,000 net additions to its high-speed internet segment, which was up from 14,000 a year ago. Telus TV, however, saw a decrease from last year, as 9,000 net additions for the quarter were down from 14,000 a year ago.
Overall, wireline revenue was up just 1% this quarter, but adjusted EBITDA was able to increase 3% as a result of lower costs.
Like other telecom companies, Telus faces a growing risk of customers leaving for online services. However, this is not something I see as being a long-term risk to the industry and could be a fad, especially as TV providers start offering online services as well.
Unfortunately, there is nothing pushing the industry to act faster because competition is limited.
Monthly churn continues to decline, but danger looms ahead
Telus saw its monthly churn for postpaid customers improve to just 0.86%, which is down from 0.94% a year ago. Its blended churn rate of 1.05% was also down from 1.18% in 2016.
To put this into perspective, Rogers Communications Inc. (TSX:RCI.B)(NYSE:RCI) was excited about a churn rate of 1.16% in its most recent quarter and was the third best that it had achieved in the last eight years.
Churn rate is important as it measures the number of customers leaving, and a low turnover means that a company has to spend less on retention to keep existing customers.
The one looming risk on the horizon for Telus is Shaw Communications Inc. (TSX:SJR.B)(NYSE:SJR) and its entrance into the wireless segment with its Freedom Mobile brand. Over the long term, that could lead to subscriber losses for Telus, as Shaw creates a more formidable brand to compete in the industry.
Dividend increase
As a result of the strong results, Telus announced that it would be increasing its quarterly dividend to $0.505, which is a 2.5% increase over its most recent payment of $0.4925. It is the second increase this year by Telus, and in five years payouts have grown 58%.
Is the stock a buy today?
Telus has seen its stock rise 11% so far this year and has not only outpaced the TSX, but has also done better than all the big telecom stocks outside of Rogers. It has a strong position in the industry, and there’s no reason to see anything changing that in the foreseeable future.
If nothing else, Telus should provide some stability for investors, and, along with a growing dividend, that could make it a great long-term investment to add to your portfolio.
