The Canadian telecom scene has been under quite a bit of pressure over the past two years. And while it’s hard to tell if the industry-wide selling is over with yet, I do think that the recent much-awaited rally in shares of Rogers Communications (TSX: RCI.B) is worth getting behind. Indeed, it was an unexpected bump, to say the least, but with the newfound momentum, should dividend hunters be interested in the perennial underperformer again now that it has ricocheted off its $32 and change multi-year lows? As always, time will tell. And while I’m not personally inclined to chase Rogers after a more than 45% surge off 52-week lows, I do think that the latest round of quarterly results was encouraging.
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Rogers has a nice dividend and some positive momentum behind it
With shares starting to show signs of slipping again, recently plunging 3.5% on Tuesday’s turbulent session, I do think value investors might get another attractive entry point into a dividend growth sensation that’s showing signs that it’s getting back on the right track. At the time of this writing, shares of RCI.B (the class-B shares) sport a 4% dividend yield. It’s a well-covered payout that’s poised for greater growth, but amid industry challenges, can Rogers keep skating ahead? Undoubtedly, Rogers’ sports interests could prove incredibly resilient, especially since it is the only game in town for many Canadians to watch their favourite Canadian ice hockey team.
Whether you’re a diehard Leafs Fan, a devoted Canucks fan, a believer in the Flames, or set on the Oilers finally hosting the cup in 2026 (with Florida Panthers centre Alexander Barkov out for the season, perhaps this is the year the Oilers finally win it all), odds are you’ll have to go through Sportsnet to catch most televised games.
Indeed, the price hikes are really starting to add up, especially the latest round, which came into effect a few weeks ago. However, the choice is either pay the hefty price tag or do not watch one’s favourite team, something that could prove too difficult for the many hockey fanatics across the nation. At first, I was skeptical of the 12-year NHL deal. But now, it’s looking like Rogers might make a great deal if fans continue to pay higher prices for their subscriptions.
Solid assets and cash flows, but industry challenges remain
As Rogers deepens its sports moat, I do view it as a more intriguing telecom than some of its Big Three rivals. In any case, wireless needs to get back on the right track if Rogers’ stock is to keep powering higher. Growth has been rather sluggish, and with industry pressure on prices, it could prove difficult to keep growing as it did in the last quarter. For now, the stock looks quite cheap at around 17.1 times trailing price-to-earnings (P/E). I’m not sure what to make of nascent endeavours into satellite connectivity.
Either way, I’m a fan of the multiple, the amount of free cash flow coming in, and the potential for impressive annual dividend growth. Of course, time will tell what happens to margins if Rogers is forced to lower prices to stay more competitive in a climate that may see Canadians gravitate towards lower-cost options, even if it doesn’t mean getting the best network.
So, in short, great assets, but there are question marks when it comes to wireless margins over the long run. Though the dividend is robust and growthy, I’d much prefer waiting for a near-term pullback (perhaps to the $40-42 range) before buying shares.
