There are quite a few sectors of the market that are not doing very well these days. One of those includes the telecommunications sector. Higher interest rates and inflation have led many to put off investing in the stock, with sales falling during this time.
Yet analysts believe that this could change in the near future. Meanwhile, you can grab onto a strong dividend from many of these companies, which is why I’ll never sell these two.
Why telecom?
The beginning of 2024 hasn’t been great for telecommunications companies, but these dividend stocks certainly have strong fundamentals that could lead to a stronger 2024. In the near term, analysts believe there is going to be a pretty boring event schedule for the companies, and rightly so. The stocks will need to reset after 2023 and look at competition after several acquisitions, mergers, and other major moves in the last year.
If these dividend stocks hope to create growth in the next year, however, analysts believe the focus should be on market expansion and finding cost efficiencies by any means possible. This was seen through several telecom moves, including consolidation and a new fourth-place national wireless player in 2023.
In 2024, analysts now forecast that there should be slight revenue growth as the market expands and more focus on 5G from consumers. With this outlook, valuations today look quite reasonable. So, which are the two telecom stocks investors should focus on today and never let go?
Get big
For investors, the next year should certainly see Rogers Communications (TSX:RCI.B) outperform in the next year. The merger with Shaw stock has analysts eying a net asset value of $72 per share after the integration. Therefore, right now is an attractive entry point at about $63 per share as of writing.
Furthermore, cost synergies of around $1 billion in the first half of 2024 are likely to create an attractive 9% adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA). As the synergies continue, the stock will become less risky and more competitive.
TELUS (TSX:T) also provides a strong option as well, though for far different reasons. Cyclical impacts on this international, agriculture and consumer goods arms have hurt the stock. Not to mention its tech focus. Add to that the competitive impact of the Rogers-Shaw deal, and it’s been a rough year for the company.
However, in 2024, there should be strong EBITDA growth that will remain on the high end. Add onto this more cost efficiencies as the market improves. The stock should continue to see growth in shares as a result. This certainly makes it valuable today.
Why I say “never”
If you never sold these stocks, you wouldn’t make returns. But when I say never, I mean I’ll never sell them until I reach my goals. For you, that might be a downpayment on a house or retirement. And that can range from a couple of years to a couple of decades.
In this case, these two dividend stocks offer a great option for those seeking higher returns in the short run, while getting value for the dividends. Further, they have a long history of growth that will likely continue for decades to come.
So, with Rogers offering a 3.17% dividend yield and TELUS stock at a whopping 6.21%, it’s a great time to consider these dividend stocks on the TSX today.
