Cogeco Communications (TSX:CCA) vs. Cogeco (TSX:CGO): Which Is the Better Buy?

Cogeco Communications Inc (TSX:CCA) and Cogeco Inc (TSX:CGO) are two top cable stocks to buy in Canada. They have their differences, though, and it’s important to understand what you are buying with each.

| More on:
Lady holding remote control pointed towards a TV

Image source: Getty Images.

The telecommunications space continues to be an exciting area to invest, and cable seems to be a top sub-sector in the industry. After a few years of cable stocks selling off due to the market’s nervousness about the risk surrounding cord cutting, it seems as though the negative affects won’t be as bad as anticipated.

When looking to invest in solid growth companies today, a top company to consider is Cogeco (TSX:CGO). Investors may be confused between the two companies listed on the TSX. Cogeco Communications (TSX:CCA) is a separate stock all together, but what is the difference, and which is the better buy?

Cogeco

Cogeco is a Canadian telecommunications and media company headquartered in Montreal that serves residential and commercial customers through its subsidiaries.

Although its market cap is smaller than Cogeco Communications, it is the parent company. In addition to owning 31.7% of equity shares and having 82.3% of the voting rights in Cogeco Communications, it also owns Cogeco Media, a radio broadcaster in Quebec.

Cogeco Media has 23 different radio stations and is focusing on expanding its footprint and grabbing more market share. At the end of May, Cogeco Media had trailing 12-month revenue of $111 million.

Cogeco’s market cap is roughly $1.3 billion, it’s trading at a P/E ratio of 11 times, and it pays a dividend that yields around 1.85%.

Cogeco Communications

Cogeco Communications has a market cap of $5.2 billion, a P/E ratio of 13 times, and a dividend that yields about 2%. It’s been in business since 1972 and is growing itself through acquisitions and organic growth.

Its main operations are in Canadian and American broadband. Its Canadian operations consist of Cogeco Connexion. Cogeco Connexion is the second-largest cable operator in Ontario and Quebec, with over 1.7 million households and 150,000 business customers.

Cogeco’s American broadband company is Atlantic Broadband. Atlantic operates all along the east coast and is the ninth-largest cable operator in America. Its customers consist of over 875,000 houses and 185,000 businesses.

Cogeco Communications recently sold Cogeco Peer 1 earlier in 2019 for $720 million, giving it a gain on disposal of $82.4 million. Cogeco Peer 1 was a business-to-business IT provider, but it did only a small segment of the company’s revenue.

The sale allows it to focus solely on its Canadian and American broadband segments. It also gives the company extra cash to pursue acquisitions or invest in organic growth.

For the nine months ended May 31, it had revenue of $1.75 billion and EBITDA of $832 million, giving it an EBITDA margin of nearly 50%.

Total diluted earnings per share came out to $6.54, and the dividends amounted to $1.58.

Bottom line

Cogeco is an ideal investment for those who believe that cable will remain strong in the future. A few years, ago these stocks were sold off hard, as the market was concerned with the risk of cord cutting.

The cable companies have managed to innovate and retain more customers than was expected, and now if you are bullish on cable, Cogeco is a top stock to buy.

While both stocks track very similarly to each other, I would choose CCA over CGO, since CCA has the larger market cap, and its stock has more liquidity, which can be an important factor.

I also don’t necessarily want or need exposure to its radio assets, but for investors who don’t mind the lower liquidity and want exposure to the radio assets, I would recommend CGO.

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 Daniel Da Costa has no position in any of the stocks mentioned.

More on Dividend Stocks

top TSX stocks to buy
Dividend Stocks

Passive Income: How Much Should You Invest to Earn $500 Every Month?

These two Hamilton ETFs could be the perfect way to achieve modest passive-income potential.

Read more »

Growing plant shoots on coins
Dividend Stocks

3 Growth Stocks That Could More Than Double Their Revenue by 2025

Three growth stocks outside the tech sector are strong buys for their massive revenue growth potential by 2025.

Read more »

Payday ringed on a calendar
Dividend Stocks

These 2 TSX Dividend Machines Pay You Monthly

Here are two of the best monthly dividend stocks you can buy in Canada right now and hold for the…

Read more »

Dividend Stocks

This 8% Dividend Stock Pays Cash Every Month

This dividend stock has a solid present, and a strong future for investors looking to gain monthly passive income while…

Read more »

edit Close-up Of A Piggybank With Eyeglasses And Calculator On Desk
Dividend Stocks

How to Earn at Least $1,560 in Passive Income in 2024 With Less Than $40K in Savings

If you have $40,000 sitting around, here is exactly how you can put it away and gain at least $1,560…

Read more »

Payday ringed on a calendar
Dividend Stocks

1 Under-$50 Dividend Stock to Buy for Monthly Passive Income

A dividend stock under $50 is the best option for those investing for monthly passive income.

Read more »

Target. Stand out from the crowd
Dividend Stocks

3 No-Brainer Stocks to Buy Right Now for Less Than $10

These three dividend stocks are no-brainer buys right now, especially since it won't take much cash at all to buy…

Read more »

A meter measures energy use.
Dividend Stocks

Forget Air Canada: Buy This Magnificent Utilities Stock Instead

A Dividend Aristocrat in the utility sector is a better buy than Air Canada.

Read more »