Here’s the Telecom Your Portfolio Needs

Looking for a great income- and growth-focused investment? Telecoms are great options, and here is one telecom your portfolio needs right now.

Earlier this month, I’d compared two of Canada’s larger telecoms, attempting to determine which was the better option for investors. Today, let’s take a look at another telecom, Shaw Communications (TSX: SJR.B)(NYSE: SJR), and see whether Shaw could be the telecom your portfolio needs.

One of the first things that prospective investors should take note of is that Shaw is somewhat different from its larger peers. That difference comes down to the three core areas: Shaw’s revenue stream, growth focus, and income-generating potential.

Revenue: Shaw is not your typical telecom

Starting with Shaw’s revenue stream, the key difference to note here is that Shaw lacks a media segment. Shaw’s larger peers have established media segments that contain dozens of radio and TV stations. That media segment provides an additional revenue stream for Shaw’s peers.

While that may seem like Shaw is at a disadvantage, that’s not the case. As a pure-play telecom, Shaw is focused on growth and generating a handsome income. But do the results justify Shaw being the telecom your portfolio needs?

In the most recent quarter, Shaw reported consolidated revenue of $1.38 billion. When compared with the same quarter last year, Shaw’s consolidated revenue numbers saw a 4.8% increase. Adjusted EBITDA for the quarter of $642 million, reflecting a year-over-year improvement of 5.4%. Collectively, net income for the company came in at $354 million.

That’s not bad for a smaller, pure-play telecom that lacks a media segment, right?

Shaw boasts immense growth potential

While Shaw does offer similar subscription services to its peers, its wireless segment is significantly smaller. Again, that smaller size actually puts Shaw at an advantage over its larger peers in some ways.

To understand that, let’s circle back on Shaw’s peers. They offer nationwide coverage and are alike in more ways than it may seem. Two of those areas in which they are incredibly similar are in higher costs, and, in many ways, not-so-happy customers.

Shaw has done a masterstroke in focusing on those weaknesses. The company continues to aggressively market to the customers of its larger peers, offering plenty of incentives. The fact that Shaw has a much smaller network also means costs are lower. By extension, this translates into Shaw offering better terms at a lower cost over its peers. The company’s wireless segment is even named appropriately to further that mission: Freedom Mobile.

In addition to seeing solid growth and expanding its network, Shaw also launched another service last year, known as Shaw Mobile. This heavily discounted service is targeted aggressively at Shaw’s existing internet and TV subscribers in Alberta and B.C.

Between Shaw’s Freedom and Mobile offerings, the company is establishing a defensive foothold from which it can expand to counter its larger peers. That growth also helps Shaw continue to provide investors with a tasty dividend.

Did someone say dividends?

One final difference that Shaw carries over its larger peers is its dividend. Unlike all of its telecom peers, Shaw doesn’t offer a quarterly payout. Instead, the company has opted for the rarer, yet enticing monthly distribution.

Currently, that payout works out to an impressive 3.26% yield. To put that earnings potential into context, a $35,000 investment in Shaw will provide $95 each month in income. Investors not ready to draw on that income can reinvest those dividends, letting them grow further until needed.

Final thoughts

Earlier this year, one of Shaw’s larger peers made a multi-billion-dollar offer to acquire the company. That $26 billion deal was approved by Shaw and Rogers, but that deal still needs to pass a slew of regulatory approvals. That approval, if it does come, won’t happen until sometime well into next year.

More importantly, Shaw’s stock price is still far below the purchase price, making it an undervalued gem. This means that if the deal does go through, Shaw shareholders that hang on will be in for a double-digit windfall. If the deal doesn’t go through, there’s still Shaw’s plan for growth and that juicy monthly dividend.

Either way, Shaw is a great investment and arguably the telecom your portfolio needs.

Fool contributor Demetris Afxentiou owns shares of Shaw Communications. The Motley Fool recommends ROGERS COMMUNICATIONS INC. CL B NV.

More on Investing

A meter measures energy use.
Energy Stocks

Rates Are Rising Again: Is Emera Still a Sensible Retirement Stock?

Emera still offers retirement income, but borrowing costs and per-share earnings decide how comfortably that payment can grow.

Read more »

ETFs can contain investments such as stocks
Dividend Stocks

How to Use a TFSA to Generate $200 in Monthly Tax-Free Income

Use a TFSA to build $200 in monthly tax-free income with XEI and ZRE. See how these ETFs work and…

Read more »

Business success of growth metaverse finance and investment profit graph concept or development analysis progress chart on financial market achievement strategy background with increase hand diagram
Dividend Stocks

Smart Ways to Invest Extra Income and Say Goodbye to Financial Stress

Canadians have ways to make their extra income work as hard as they do and say goodbye to financial stress.

Read more »

how to save money
Energy Stocks

How Much Would You Need to Invest in Enbridge to Average $200 a Month?

Enbridge’s current dividend needs roughly $42,600 in shares to average $200 monthly, with payments arriving every quarter.

Read more »

Two seniors walk in the forest
Dividend Stocks

Sun Life Stock Pays 3.3%: How Much to Invest for $100 a Month in Dividends

Sun Life Financial (TSX:SLF) might be a massive bargain after Thursday's vicious plunge as stock markets sold off hard.

Read more »

TFSA (Tax free savings account) acronym on wooden cubes on the background of stacks of coins
Dividend Stocks

How to Turn Your TFSA Into $1,000 a Month in Tax-Free Income

Build toward $1,000 a month in tax-free income with a TFSA. See how Enbridge, Scotiabank and ZWC could help, and…

Read more »

customer fills up car with gasoline
Dividend Stocks

How Much Emergency Money Do Canadians Actually Need?

A safety fund equivalent to 3 to 6 months of living expenses is generally the baseline buffer that Canadians would…

Read more »

Piggy bank in autumn leaves
Bank Stocks

Rates Are Rising Again, So Are GICs and High-Interest Savings ETFs Even Worth It?

The Bank of Canada hiked rates to 2.50%. See what a GIC or the Purpose savings ETF earns on $10,000…

Read more »