Here's What I Would Buy Instead of Telus Stock

Here’s What I Would Buy Instead of Telus Stock

This infrastructure ETF offers access to a portfolio of top Canadian dividend stocks as a compelling alternative to investing in Telus.

Tony Dong, MSc, CETF®

Tony turned a series of 2017 marijuana stock losses into a freelance career advocating for ETF investing. He currently holds a Master’s in Risk Management from Columbia University and is a Certified ETF Advisor (CETF®). Tony is the founder of ETF Portfolio Blueprint (etfportfolioblueprint.com) and the Lead ETF Analyst for ETF Central, a partnership between Trackinsight and the NYSE. His analysis has also been featured in publications like Kiplinger, 24/7 Wall St., U.S. News & World Report, TheStreet, and Benzinga. Tony also provides independent content and marketing consulting services to various Canadian and U.S. ETF issuers. His editorial opinions for The Motley Fool remain independent and objective.

Published June 20, 2023 1:30 pm EDT

| More on: TUTIL

Have you been eyeing Telus (TSX:T) lately as a potential buy? I totally get why. With its strong foothold in the oligopolistic Canadian telecom industry and a track record of paying consistent, above-average dividends, Telus is indeed a tempting prospect, especially considering its juicy forward annual yield of 5.67% right now.

But remember, Telus is still a single stock, and that means exposure to specific company risks. What if I told you there’s a way to maintain exposure to sectors like telecoms, while also diversifying into pipelines and utilities – all at once?

Thats right. Thanks to Horizons ETFs, investors have access to an incredible ETF that provides exposure to 10 of the top high-dividend yield infrastructure stocks on the Canadian market. Let’s take a look at what this ETF has to offer.

ETF chart stocks — Image source: Getty Images

UTIL explained

Personally, I’m not a dividend investor, but if I had to pick an ETF that held a high-conviction portfolio of what most Canadian investors look for, the Horizons Canadian Utility Services High Dividend Index ETF (TSX: UTIL) would be my go-to.

Why? Well, by passively tracking the Solactive Canadian Utility Services High Dividend Index, UTIL manages to:

Hold 10 of the leading Canadian utility, telecom, and pipeline companies.
Pay an above-average estimated annual dividend yield of 3.99%
Pay dividends on a monthly basis.

All this comes at a 0.62% expense ratio, which might seem pricey, but remember that you no longer have to buy stocks individually, which means paying commission and incurring losses on the bid-ask spread.

UTIL exposure

You might be thinking: “Does this ETF have exposure to Telus?” The answer is a resounding, yes. Currently, Telus sits at 8.21% of this ETF. You also gain a similar 8%-ish exposure to the following stocks:

Utilities: Brookfield Renewable Partners LP, Brookfield Infrastructure Partners LP, Fortis, Emera, and Hydro One.
Pipelines: Enbridge and TC Energy Corp.
Telecoms: Rogers Communications, Telus, and BCE.

Look familiar? Many Canadian investors already have many, if not all, of these names in their dividend portfolio. UTIL simply packages them together on your behalf and weights them equally.

The Foolish takeaway

If you want Telus exposure, buying an ETF like UTIL is an easy way to ensure that it becomes around 8% of your portfolio, assuming UTIL is your only holding. In my opinion, this strikes a good balance between diversification and concentration.

However, investors should remember that UTIL lacks exposure to several key Canadian industries, such as banking and insurance. For some great dividend stock picks here, check out the Fool’s recommendations below!