As fears grow over a continued market downturn, investors looking for a safe spot to park their money should be well-served by Canada’s telco companies, says Barry Schwartz of Baskin Wealth, who picks Rogers Communications (Rogers Stock Quote, Chart: TSX:RCI.B, NYSE:RCI) as the best of the bunch.
“Everybody wants the magic bullet, the holy grail, which is high yields and no risk whatsoever,” says Schwartz, vice president and chief investment officer with Baskin Wealth, to BNN Bloomberg. “There’s no free lunch in the investment market but the telcos are a pretty good investment to be in.”
“Not necessarily the US telcos because I think they’ve made some very terrible investments in media, overpaying, and clearly their businesses are in trouble,” says Schwartz, “whereas the Canadian telcos are much better, they’re better run, they have much better balance sheets, they haven’t blown their brains out on media investments.”
Canada’s telecom stocks were a disappointment earlier this year as investors reacted to a higher interest rate environment, but while both BCE (TSX, NYSE:BCE) and Telus (TSX:T) have struggled to make up that lost ground, Rogers is now up over six per cent for the year.
Rogers released its third quarter financials two weeks ago, generating three per cent revenue growth year-over-year and eight per cent adjusted EBITDA growth year-over-year. The quarter beat analysts’ expectations for EPS at $1.21 per share versus the consensus estimate of $1.17 per share, while revenue from its wireless business rose 5.8 per cent to $2.33 billion. Rogers saw a marginal boost in revenue from its cable business, as well, which grew by one per cent to $983 million.
“Rogers has been very disciplined right now, really focused on paying down debt, so that would be the one I’m going with,” says Schwartz. “Of course, it hasn’t raised its dividend in two years but I think that Rogers has the best suite of assets in Canada in terms of telcos and the best assets in wireless.”
“And wireless is where you want to be — I’ve talked about it ad nauseam, we’re all addicted to our cellphones and you want to own the guys who provide the toll road to the Internet and to wireless,” he says.