Telus Inc. (TSX:T)(NYSE:TU) stock is down 3.5% so far in June. Last week was a particularly difficult week for Telus. And while it was difficult all around, Telus’ performance was worse than that of the S&P/TSX Composite Index.
Despite this, I am here to tell you that buying Telus stock is one great way to prepare for the next market crash.
The extent of the economic hit that caused by COVID-19 is becoming increasingly clear and painful. Upcoming earnings will underscore the fact that hard times are here to stay — at least for a little while. And a stock market that is attempting to brush off this crisis may be in for a wake-up call.
In this case, it is essential for us to buy stocks that will be more immune to this economic and stock market crash.
Telus stock protects your investment from a stock market crash with a generous yield
Telus is currently yielding a very generous 5.06%. This is not only a generous yield, but it is also well covered. Telus’ payout ratio of 83.9% is in line with its industry peers’ average and backed up by healthy free cash flows and strong liquidity. In its latest quarter, Telus reported free cash flow of $425 million.
Buying Telus stock today would give you an annualized return of 5%. If you can hold the stock through the crisis, you won’t really care what the short-term movements are. In the event of a stock market crash, you still pocket a 5% return in the form of dividend income.
Telus has staying power
The telecommunications industry is a defensive one. And Telus is a top performer, with strong free cash flow growth and, up until recently, strong dividend growth. Its revenues are sticky.
Today, with isolation and social distancing policies in effect, telecommunication companies are seemingly more important than ever. All of this should drive demand for Telus stock.
Exposure to healthy growth
On top of being one of Canada’s telecommunications giants, Telus is also an innovator. The company is involved in two areas that have strong growth trajectories ahead. These growth areas are a sign of the times. They couldn’t have an environment more conducive to their growth and success.
Telus Health is a healthcare app by Telus and a great example of how technology can make our healthcare system easier and better. It is even more evident now as it transforms the Canadian healthcare system at unprecedented speed.
Babylon by Telus Health is a healthcare mobile app that allows patients to check symptoms and have doctor consultations. Sounds useful in today’s times, right? The Telus Health Electronic Medical Record (EMR) solution has invested $ 2 billion in the Canadian healthcare system in the last five years and has a dedicated team to manage all tech and data needs.
Telus International, which helps companies with their digital transformation, is another beneficiary. Telus International “provides customer service outsourcing and digital IT services to global clients.” It is at the forefront in the digitization of society. We can therefore expect to see demand improve dramatically in the coming months.
The rise in remote workers has been dramatic, with a 170% increase. Telus’ 5G network will increasingly allow work from anywhere. This is expected to drive a boost in productivity, while ensuring business continuity.
Foolish bottom line
Telus stock provides investors with a safe haven of sorts, sheltered from market volatility. Telus provides a guaranteed 5% return via the dividend and good potential for healthy growth of the business.
Telus stock is therefore a good buy to help us prepare for another stock market crash.
Speaking of top stocks ...
Renowned Canadian investor Iain Butler just named 10 stocks for Canadians to buy TODAY. So if you’re tired of reading about other people getting rich in the stock market, this might be a good day for you.
Because Motley Fool Canada is offering a full 65% off the list price of their top stock-picking service, plus a complete membership fee back guarantee on what you pay for the service. Simply click here to discover how you can take advantage of this.
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 Karen Thomas has no position in any of the stocks mentioned.