Is Telus (Telus Stock Quote, Chart TSX:T) the right defensive play among Canada’s telcos?
Possibly, says Norman Levine of Portfolio Management, who argues that, really, little separates the big three of BCE, Rogers and Telus —the big four if you count Shaw and even the big five if you add in Quebecor— since in the end, it’s more a matter of where interest rates are heading.
Telus has been on a roll as of late, hitting new highs and impressing with its ability to bounce back after a rough second half to 2018. The stock is now up 10.4 per cent year-to-date and even broke the $50 mark in trading on Tuesday for the first time. Both BCE are Rogers are also on the plus side for 2019, with BCE up 12.1 per cent year-to-date and Rogers up just 1.4 per cent.
All three are enjoying top and bottom line growth over recent quarters, thanks in no small part to rising customer adds across wireless and Internet. For its part, Telus saw revenue jump from $3.54 billion to $3.76 billion over its fourth quarter, delivered in February, while adjusted earnings grew from $396 million or 66 cents per share a year ago to this year’s Q4 of $409 million or 69 cents per share.
Levine says investors looking for a steady dividend are likely to be happy with Telus.
“Is Telus going to be able to continue raising dividends at the same rate? I believe so, but remember, they’re in an industry where things change all of the time, so there’s always that question,” says Levine, managing director at Portfolio Management Corp, to BNN Bloomberg on Wednesday. “Telus is actually more exposed to Huawei that BCE is. Rogers has no exposure, BCE has some and Telus is the most vocal here and they do have some issues. It’s something to keep in the back of your mind, but overall, interest rates are going to govern the major moves in Telus and similar stocks.”
“We don’t own Telus. Our choice in that area is BCE. But give or take, these stocks tend to move similarly. Some do better than others at any given time. Most of all, they react to interest rates,” he says.
“If you look at [Telus’] chart, when people thought that interest rates were going up, the stock was going down, and so was BCE. Interest rates turned around and started going down and these things all took off as investors were starting to chase yield,” he says.
Last week’s federal auction for cellular airwaves saw both Rogers and Telus spending big on spectrum to send wireless signals, with Rogers paying $1.7 billion and Telus paying $931 million. In order to increase competition in the sector, the federal government reserved a portion of each spectrum block for smaller regional carriers including Shaw and Quebecor.