Telecommunications companies represent TSX’s communications services sector but not the entire Canadian communications industry. The giant telcos contribute around 73% of industry revenues and the broadcasting sector accounts for the rest. However. the telecom oligopoly composed of BCE, TELUS (TSX:T), and Rogers Communications dominates the market.
From an investment standpoint, these wireless providers are cash cows and generous passive income providers. But if you’re looking to buy the best stocks this month, TELUS and Evertz Technologies (TSX: ET) are lucrative choices. The former is Canada’s second-largest telco with diversified businesses, while the latter is doing well in the television, telecommunications, and new media industries.
Multi-year dividend program
TELUS has no media business segment like BCE and Rogers Communications but isn’t reliant solely on telecommunications products and services for revenues. The $34.4 billion company is an agriculture technology company through TELUS Agriculture and a healthcare provider via TELUS Health.
On the information technology side, it has TELUS International to provide IT, multilingual customer services, and next-gen digital solutions to global clients. TELUS is a strong buy following its most recent financial and operational quarterly results.
In the three months ending December 31, 2023, operating revenues, net income, and free cash flow (FCF) increased 2.6%, 17%, and 82.7% respectively to $5.2 billion, $310 million, and $590 million versus Q4 2022. The 126,000 mobile phone additions were the best fourth quarter since 2011, while the 1,266,000 Mobility and Fixed customer additions for the year were a new record high.
While operating revenues and FCF in 2023 increased 9.3% and 38.1% year over year to $20.1 billion and $1.8 billion, net income declined 49.5% to $867 million from a year ago. TELUS President and CEO Darren Entwistle said the company endured a challenging macroeconomic landscape and highly competitive industry.
The good news for investors is the multi-year dividend program that targets semi-annual dividend increases. TELUS targets 7% to 10% dividend hikes through year-end 2025. If you invest today, this 5G stock trades at $23.30 per share and pays a 6.46% dividend.
Broadcast industry supplier
Evertz Technologies operates in the communication equipment industry but belongs in the information technology sector. This $1.1 billion company develops software and hardware products and services for the broadcast and film industry. At $14.28 per share (+2.5% year to date), you can partake in the 5.46% dividend.
The Burlington-based firm’s customer base includes broadcasters, content creators, specialty channels, and television service providers. Evertz has displayed strong profitability in fiscal years 2022 and 2023 despite massive headwinds.
In Q2 fiscal 2024 (three months ending October 31, 2023), revenue increased 15% year over year to a record $130.7 million. Notably, international revenue rose 128% to $56.7 million versus the same period in fiscal 2023. In Q2 and the first half of fiscal 2024, net earnings climbed 11.4% and 12.5% year over year to $22.2 million and $38.1 million, respectively.
Significant market players
TELUS and Evertz are significant market participants in Canada’s communications industry. Both companies have favourable business outlooks owing to their respective growth drivers and catalysts. More importantly, the businesses could sustain the hefty dividend payments.
