Gardner addressed Bank of Canada Governor Mark Carney’s recent comments that Canadian companies are hoarding too much cash ( three times the historical average) while productivity growth has slowed. Carney believes Canadian companies should either invest the cash it or dividend it out to shareholders.
Gardner says the big problem in Canada is innovation. He says Canada’s productivity ratio is not only lower than the United States, but lower than most developed nations.
One company that has had no problem innovating or putting cash to its balance sheet of late is Telus (TSX:T).
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Gardner Telus is the best in class, better even than BCE, which he owns. He does not own Telus, he says, because its price point always seemed to high. This, he concedes, has been a mistake. Gardner says one weak spot has been that Telus is losing wireline and cable subscribers to rival Shaw. Nonetheless, he says, this is a stable company with great free cash flow, great wireless growth and a balance sheet that is “pristine”. The fund manager also believes there is a good chance Telus will raise its dividend, which currently sits at 3.8%.
Founded in 1990, Vancouver-based Telus provides a range of telecommunications products and services, including wireless, wireline, data, digital television, and IP services. The company was created by the government of Alberta to facilitate the privatization of a crown corporation, called the Alberta Government Telephones Commission. The Telus we know today was created by the 1999 merger of Telus and BC Tel, a move that instantly made it Canada’s second largest telecom behind Bell Canada. The company’s stock has been a star performer; in the past decade it has moved from under $8 to more than $60.
At press time, shares of Telus on the TSX were up 1% to $64.19.
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