3 Incredible Reasons to Invest in This Telecom Right Now

Since the roll-out of Freedom Mobile began, Shaw Communications Inc. (TSX:SJR.B)(NYSE:SJR) has made incredible progress penetrating what was an exclusive club of telecoms.

| More on:

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn more

Telecoms are widely considered to be some of the best defensive investments on the market, thanks in part to their steady stream of revenue and mature networks that make it both cost-prohibitive and time-consuming to introduce a new market disruptor.

But what if there was a way to penetrate that market, with a fresh new telecom that offered aggressive pricing and benefits posed to disrupt that market?

If that sounds like an appealing opportunity, let’s take a moment to talk about Shaw Communications (TSX:SJR.B)(NYSE:SJR) and three reasons why you should consider adding the company to your portfolio today.

Shaw’s wireless footprint continues to grow

Shaw’s much-hyped roll-out of Freedom Mobile continues to draw in more customers and intrigue across the market. To date, the company has secured 5% of the overall market in a short amount of time, and the wildly popular pricing and availability of that service in a growing number of retailers across the country is set to continue growing over the next few quarters.

Skeptics of Shaw’s wireless roll-out often point to the telecom’s much smaller network size, particularly when compared to the coverage offered by the Big Three. The hypothesis behind that argument is that Shaw will never be able to attract the subscriber numbers needed to build a national network, and even if did manage to finance that growth, it would take years, if not a decade or more, to materialize.

Let’s debunk this myth by mentioning the sheer brilliance behind Shaw’s mobile offering.

While it’s a well-known fact that Shaw’s network is smaller than its peers, Shaw is excelling in the markets where it is operating, thanks to aggressive pricing and generous data packages. Canada already has some of the highest data prices in the western world, so Shaw placing some downward pressure on price is good for both Shaw and customers.

Strong results are going to become the norm

Shaw’s incredible rise to fame as the wireless network disruptor has not only rattled the Big Three but has also ushered in a period of lucrative opportunity for investors as subscribers continue to abandon the Big Three for Shaw.

Last month, Shaw provided an update on the first fiscal quarter of 2019, and the numbers were impressive. Consolidated revenue across the company saw an 8.8% uptick over the same quarter last year, spearheaded by stellar growth from Shaw’s mobile segment. Speaking of that mobile segment, Freedom Mobile realized over 86,000 new postpaid subscribers in the quarter and even managed to improve its churn rate to just 1.28%. Consolidated revenue from the wireless segment saw an incredible 60% improvement over the same period last year, rising to $273 million.

Looking beyond the wireless segment, Shaw’s other segments also posted positive gains. Despite an expected drop in some more mature areas of the business such as video, satellite, and phone subscriber revenue, Shaw’s wireline revenue managed a small but notable bump in revenue to $1,083 million.

Overall, the company reported net income of $187 million, surpassing the $111 million reported in the same quarter last year. Free cash flow for the quarter also came in much improved over the same period last year, coming in $100 million higher at $164 million.

A mouth-watering dividend

One of the primary reasons that many investors turn to telecoms is for their reliable dividends, and this especially rings true for Shaw. The company offers an appetizing monthly payout with a yield of 4.41%.

Investors contemplating an investment in Shaw should note that while impressive, Shaw hasn’t provided a dividend hike to shareholders in several years. Instead, the company is reinvesting into growing its wireless segment. It’s a fair trade-off considering the long-term potential of the company.

In my opinion, Shaw represents an excellent long-term opportunity for investors looking for both income and growth prospects from a traditionally defensive investment.

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 Demetris Afxentiou owns shares of Shaw Communications.

More on Dividend Stocks

money cash dividends
Dividend Stocks

2 Passive-Income ETFs to Buy in 2022

Unlike stocks, distribution-focused ETFs may not offer an equally healthy capital-appreciation potential, but they might still be worth buying.

Read more »

Businessperson's Hand Putting Coin In Piggybank
Dividend Stocks

RRSP Investors: 2 Top Total-Return Stocks to Build Retirement Wealth

These top TSX dividend stocks offer high yields and currently trade at discounted prices.

Read more »

Dollar symbol and Canadian flag on keyboard
Dividend Stocks

The 3 Best TSX Dividend Stocks That Pay Cash Monthly

Looking to earn monthly passive income from top dividend stocks? Here are three fresh ideas for July 2022.

Read more »

Cogs turning against each other
Dividend Stocks

2 Resilient Value Stocks That Could Weather the Storm

The resilient businesses of two value stocks can help you endure recessionary pressures and deliver superior returns in 2022.

Read more »

Senior Man Sitting On Sofa At Home With Pet Labrador Dog
Dividend Stocks

Retirees: Fortify Your Portfolio by Building a 2nd Pension

One of the best ways to utilize your retirement savings without depleting them is to invest them in dividend stocks.…

Read more »

Value for money
Dividend Stocks

Value Investors: These 3 TSX Stocks Are a Steal in July 2022

Shopping for undervalued stocks in July? Start your research with Canadian Tire (TSX:CTC.A) and two others.

Read more »

Golden crown on a red velvet background
Dividend Stocks

Market Correction: 1 Future Dividend King to Buy Today

Restaurant Brands International (TSX:QSR)(NYSE:QSR) stock seems way too cheap to ignore, as the defensive dividend play sags alongside the TSX.

Read more »

money cash dividends
Dividend Stocks

Got $500? Create Passive Income of $5,000 Today!

Even if you can only afford $500, you can use it to create $5,000 in passive income by remaining consistent…

Read more »