Rogers Communications stock is not a buy, this portfolio manager says

Rogers Communications (Rogers Communications Stock Quote, Chart, News TSX:RCI.B) is in negative territory for the year, with the stock currently on a month-long slump.

But even with its share price looking cheaper, there are better options in the telecom space, says fund manager Michael Sprung.

“We’re seeing a lot of fights between the various telecoms in terms of positioning, and Rogers over the last few years has certainly come back from being behind a little bit,” says Sprung, president of Sprung Investment Management, to BNN Bloomberg on Monday.

“They’ve done a lot to straighten out their consumer relations and things like that, but they’re being beaten in some other areas, such as by Bell, which is ahead in fibre to the home.”

Rogers Communications stock at 52-week low but still not a buy…

“It’s very competitive in the wireless market. I have other favourites in this sector that I would rather own than Rogers,” he says.

Rogers was a strong performer in 2018, gaining 9.2 per cent for the year, but this year has been a different story as the stock has been up and down, currently trading at $66 and returning negative 5.2 per cent. That compares to its rivals in Canada’s Big Three telcos, Telus, which is up 6.2 per cent for the year, and BCE, which has shot up an impressive 17.5 per cent.

Rogers’ latest quarterly results in July missed slightly on analysts’ expectations for both revenue and earnings, with the company posting a $3.78 billion top line compared to the expected $3.86 billion and adjusted earnings of $1.16 per share compared to the $1.17 per share forecasted. Rogers’ net subscriber additions came in lower than expected as well, at 77,000 compared to analysts’ forecast of 99,250.

“We delivered strong growth across all the key value drivers of our business, while making the right long-term investments and significantly advancing our strategic plan,” said Joe Natale, President and CEO, in the company’s second quarter press release on July 23. “Our robust fundamental performance enabled us to take an important step forward to introduce unlimited data plans with no overage fees for Canadians. This is another important initiative, led by Rogers, in putting our customers first.”

Rogers started ushering in unlimited data for wireless plans in June and was soon followed by both Telus and Bell, a sign that competition for wireless customers has been getting stiffer. Yet the loss of overage charges, which were once a lucrative revenue-generator for the telcos, has been partially offset by customers upping their plans to more expensive options.

On the dividend front, Rogers has traditionally been less extravagant than the other two, with Rogers’ yield currently at three per cent, BCE’s at five per cent and Telus’ at 4.7 per cent.

Sprung says that even with Rogers Communications stock flirting with its 52-week low, there are better options out there for investors to consider.

“Their dividend is alright but it’s not huge, and I think that their cash flow is fairly steady,” says Sprung. “I don’t know in terms of future increases when it might occur but they have over the years tended to increase their dividend fairly consistently. It’s not a stock that I would jump out and buy today but I could change my mind if it was a lot less expensive.”