Despite central banks cutting key interest rates in Canada and the U.S., inflation continues to be a problem for Canadians. Mortgage payments are not getting any easier, and people keep looking for ways to put their money to work to get better returns. Relying on a job is simply not enough any longer, and plenty of Canadians are using stock market investing to bridge the gap between their cost and earnings.
Among the strategies you can use, dividend investing is a good way to get decent returns on your investment in the stock market. Investing in high-quality dividend stocks, especially those trading at a discount, can come with two benefits. You can rely on returns through capital gains in the long run to see the value of your investment grow. While you get returns through capital gains, regular dividend income can keep growing your portfolio’s value.
Against this backdrop, I would like to discuss Rogers Communications (TSX:RCI.B) stock. A telco stock trading at a 20% discount from its all-time high at the time of writing, it might be a good pick to consider for your self-directed investment portfolio. Here’s why.
Rogers Communications
Rogers Communications is one of the Big Three telecom giants operating in Canada. Boasting over 10 million subscribers, it has around a third of the market share in Canada. The company offers wireless, cable, and internet services nationwide. It is a solid business that has faced its fair share of challenges over the years. However, it boasts solid fundamentals and is doing well as a business.
The company recently completed its acquisition of Shaw Communications, a move that cemented Rogers Communications among the Big Three telcos. The acquisition has given Rogers Communications a bigger customer base, more infrastructure, and a better hold over the total Canadian market.
The company’s performance
The first-quarter earnings for fiscal 2025 saw the company report a 2% year-over-year growth in its earnings before interest, taxes, depreciation, and amortization (EBITDA). The company’s service revenue also grew by 2% in the same period. Rogers Communications’s wireless EBITDA margins went as high as an industry-leading 65%. Overall, the business hit a 45% EBITDA margin, reflecting its ability to perform well, even under significant pressure.
The company is reporting these figures at a time when costs are rising and consumers are trying to minimize costs. Despite these challenges, the business is doing well. It has reduced its net debt leverage ratio from 4.5 times when the merger was happening to 3.6 times as of this writing.
Foolish takeaway
Dividends are an important reason many investors own shares of Rogers Communications stock. As of this writing, Rogers Communications stock trades for $44.92 per share and pays $0.50 per share on a quarterly schedule, translating to a 4.45% dividend yield. In terms of generating passive income, investing in dividend stocks like Rogers Communications offers better returns than fixed income assets.
The company hasn’t slashed dividends during COVID, economic downturns, or during the merger. It goes to show how reliable a dividend stock it can be. Trading at a 20% discount from its 52-week high, it might be a good investment to consider for your self-directed portfolio at current levels.
