Since the market lows in March 2009, Telus (TSX:T)(NYSE:TU) has had just two corrections of 15% or more — one in June 2013 and the other in January 2016 — making it exactly the kind of stock you want to own in a registered retirement income fund, or RRIF for short.
The pure-play telecom company based in B.C. has a retail shop in the Halifax Shopping Centre just around the corner from where I live. If I wasn’t already signed up with Eastlink and only with them for less than a year since moving to the East Coast, I’d have a look.
I can think of three reasons why people 71 or older should own Telus stock in their self-directed RRIF.
As I said in November, Telus is one of the few pure-play telecom companies in North America — nay, the entire world. Whether we’re talking AT&T or Verizon in the U.S. or Rogers Communications or BCE in Canada, they each have media divisions that either is already or could become one.
Verizon’s purchase of Yahoo and AOL to build a content empire has been nothing short of a disaster. AT&T certainly acquired much better assets when it bought Time Warner, but it paid a hefty price leveraging its business to the hilt in hopes customers will devour content available 24/7 on any device, anywhere and, most importantly, will pay for it.
Up here in Canada, Rogers is having a whale of a time trying to unload its media business. Currently, its best bet is for Rogers Media employees to buy the company’s five print publications and two digital brands.
As for BCE, it’s recently launched a revamped Crave to fight Netflix here in Canada. While I like HBO, which is part of the Crave package, I don’t see a conservative company like BCE spending big dollars on content as Netflix has.
And Telus? It just sticks to the basics: wireless, broadband internet and TV, and traditional landlines. That’s it. That’s all. And most of which is only available in Alberta and B.C.
Not to worry.
What it does and where it does it, Telus does it well.
Unlike its two biggest competitors, Telus is growing the number of wireless customers it has in a big way. In the third quarter ended September 30, Telus added 145,000 wireless customers, 36,000 high-speed internet customers, and 18,000 TV subscribers.
Rogers added 124,000 in the third quarter, while BCE added 178,000. Rogers had 10.8 million wireless customers at the end of the third quarter, BCE had 9.5 million, and Telus had 8.8 million.
So, in the third quarter, BCE increased wireless subscribers by 1.9%, Telus by 1.6%, and Rogers by 1.2%.
Not bad for a company viewed as a weaker, regional choice. It might not be the biggest, but it punches above its weight.
The tricky part about RRIFs is that you have to take out a minimum amount each year, which means you can’t just have income-generating investments in your self-directed plan in case you live to 100.
You’ve also got to have some capital appreciation.
That said, you’ve got to love Telus’s 4.8% dividend yield. Come hell or high water, CEO Darren Entwistle is going to boost that baby one or two times a year.
“[Telus] has increased their dividend by roughly 7% or 8% each year with a decent yield on it of 4% or so,” Douglas Kee, chief investment officer of Leon Frazer & Associates, said recently. “At the beginning of the year, the utilities got creamed because interest rates were going up. The telecoms got hurt but not as badly. More recently, the telecom companies have held in pretty well and the utilities have come back.”
As my Fool colleague Nelson Smith observed recently, Telus has raised its dividend 16 times since 2011, more than doubling its payout in less than a decade.
It’s not the dividend yield that counts, but rather the extent to which a company increases its dividend each year.
Telus isn’t shy about rewarding shareholders.
The bottom line on Telus stock
When you’re investing in an RRIF, you don’t want to take a lot of risks. By investing in Telus, you get a manageable amount of risk while lining your pockets.
Of the Big Three, Telus is my favourite by a long shot.