Why Telus Stock Could Be the ESG Play You’ve Been Waiting For

For investors concerned about the environment, Telus (TSX:T)(NYSE:TU) and Telus stock provide an intriguing ESG reason to own this stock.

| More on:
Businessman holding tablet and showing a growing virtual hologram of statistics, graph and chart with arrow up on dark background. Stock market. Business growth, planning and strategy concept

Image source: Getty Images

When looking for growth stocks, most investors don’t consider companies in the telecommunications sector. And for good reason. Investors in Telus (TSX:T)(NYSE:TU) and Telus stock are investing in these names for more than just growth.

Indeed, telecoms provide defensiveness, income, and stable returns over time. These are more “sleep at night” investments than other categories. Accordingly, Telus and its peers have been on my watch list for some time.

However, one interesting angle I’ve been looking at with Telus of late is the company’s commitment to ESG. With ESG-friendly investments soaring of late, this could be a key catalyst for any company. Indeed, Telus’ move to embrace ESG can only be viewed as a positive.

Let’s dive into what the company is doing and why investors should care.

ESG investors moving toward Telus stock

Telus recently made a big move to please investors with astonishing environmental goals. The company announced that it would sell its US$750 million worth of what many are calling “green” bonds. These bonds pay out a given interest rate to investors based on the company meeting its greenhouse gas emissions targets. However, if the company misses its targets, bond investors get paid a premium.

This sort of “putting its money where its mouth is” approach is something I think ESG investors have been waiting for. Indeed, Telus isn’t the first company to implement such bonds.

Similar issuances have been ongoing for some time. However, Telus’ move toward signaling to the market that its intent on meeting its GHG goals is meaningful for those who care about the environment.

With these sustainability-linked bonds, Telus has agreed to pay a 2.85% bond yield over the next decades. This yield would rise to 3.85% should the company miss its GHG reduction target. For Telus, missing its target would mean additional borrowing costs of US$7.5 million.

That’s quite the disincentive to procrastinate on its environmental focus.

Bottom line

Telus is one of those companies in a unique position to call attention to the ESG and sustainability cause. Indeed, the company’s rather strong balance sheet and ability to invest in such endeavors is noteworthy.

However, I think there remains a significant group of investors looking for companies willing to put a price on hitting their ESG targets. For investors in the telecom space, Telus certainly looks more attractive given these moves.

For bond investors seeking reasonable rates of return (a base yield of 2.85% actually isn’t that bad), the optionality that these bonds provide could make them attractive. Accordingly, I don’t expect Telus will run into problems raising money any time soon.

On balance, these moves are broadly positive for the company and for society as a whole. There’s a lot to like about Telus. And this is just one more reason for investors to jump aboard.

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 Chris MacDonald has no position in any stocks mentioned in this article. The Motley Fool recommends TELUS CORPORATION.

More on Dividend Stocks

protect, safe, trust
Dividend Stocks

Worried About a Recession? 2 TSX Blue-Chip Stocks to Protect Your Capital

If you fear a recession coming on soon, here are two blue-chip Canadian stocks to add to your portfolio for…

Read more »

Silver coins fall into a piggy bank.
Dividend Stocks

New TFSA Investors: 2 Top TSX Stock to Create a Self-Directed Retirement Fund

Top TSX dividend stocks are now on sale for new TFSA investors.

Read more »

money while you sleep
Dividend Stocks

Worried About the Market? 2 Dividend Stocks That Let You Sleep at Night

Here's why Restaurant Brands (TSX:QSR) and Enbridge (TSX:ENB) are two top dividend stocks to buy in this uncertain market right…

Read more »

money cash dividends
Dividend Stocks

How 1 Absurdly Cheap Stock Can Generate $100 in Monthly Passive Income

You can generate $100 or more in monthly passive income from one high-yield stock trading at an absurdly cheap price…

Read more »

Retirees sip their morning coffee outside.
Dividend Stocks

How I’d Invest $1000 in February to Make Easy Passive Income

Looking to earn some extra passive income in February but don't have much cash? Build an easy portfolio with these…

Read more »

sad concerned deep in thought
Dividend Stocks

Is it Worth Investing in Rogers or Shaw Before the Pending Merger?

A Rogers stock and Shaw stock deal looks all but certain, yet should investors still buy the stock? Or are…

Read more »

runner ties shoe while stopped on grass outside
Dividend Stocks

Is Nutrien Stock a Buy in February 2023?

Nutrien stock should benefit from the very favourable supply/demand fundamentals in the agriculture business in 2023.

Read more »

thinking
Dividend Stocks

Is Brookfield Asset Management a Buy in February 2023?

Brookfield Asset Management is among the largest stocks trading on the TSX. Let's see why BAM stock is a buy…

Read more »