For investors looking to put their next $5,700 to work, there are plenty of great options to choose from. Personally, for my next $5,700 investment, I’m looking at a number of different options, from extending my ETF exposure to picking individual names that I plan on holding for the next few decades.
Within the sectors I continue to peruse, I’m growing increasingly bullish on the telecom sector as a place to sit out some of this market uncertainty. In addition to utilities and other bond-like proxies, I’m looking to generate significant dividend income while patiently waiting for the return of a true risk-on rally.
In such an environment, I continue to think Telus (TSX:T) remains a top way to play this space.
Here’s why.
Strong operating metrics and results
When looking at any telecom stock (or really any stock, for that matter), fundamentals matter. In the case of Telus, it’s clear that the company’s incredibly strong brand domestically is driving its strong results, with many in the market seeming to believe the good times will continue.
Telus’s overall churn has come in below 1% once again in 2024, marking 12 consecutive years in which the company lost less than 1% of its customers to competitors. This extremely “sticky” consumer base has made for extraordinarily stable and robust earnings growth in recent quarters, which the market appears to be starting to appreciate.
This past quarter, Telus brought in adjusted EBITDA growth of 4%. However, the company’s cash flow grew by an astounding 22%, dwarfing most other metrics and suggesting the company’s push for greater efficiency is paying off. So long as these sorts of metrics continue to flow through, Telus remains my top pick from an operational standpoint in this sector that’s worth considering.
Don’t forget about the dividend
These strong operating margins and cash flow numbers continue to support one of the most robust and solid dividends in the Canadian telecom sector. Telus’s dividend yield currently sits at 7.6%, which is relatively high when one considers this stock also trades at around 28 times earnings.
In other words, I think Telus’s stock price should be higher than where it trades right now on the basis of its current yield (which is historically 1-2% lower than where it is now). The company will need to continue to produce solid earnings growth to make its yield and valuation make sense. But I think the company has what it takes, and that’s why this is my top telecom pick for investors looking for exposure to this space right now.
