Telus’s stock (Telus Stock Quote, Chart, News TSX:T) will be a solid one to own over the next year, according to investment advisor Bruce Campbell.
Just don’t expect fireworks from this conservative play in the telco space, he adds.
Telus impressed with its latest quarterly report, delivered in early August and boasting of strong earnings growth. The company’s second quarter EBITDA grew by 9.8 per cent year-over-year to $1.4 billion on revenue that rose to $3.6 billion, a 4.2-per-cent increase.
Wireless expansion was a major factor, where new subscriber adds beat estimates by growing by 33 per cent to 186,000 for the quarter, with wireless additions spiking by 45 per cent to 154,000.
The uptick was attributed to Telus’ ability to keep customer loyalty as a focus, according to president and CEO Darren Entwistle.
“Industry-leading second quarter mobile phone churn of 1.01 per cent, and continued improvements in wireline loyalty, drove a low combined churn rate across mobile phone, Internet and TV of 1.05 per cent,” wrote Entwistle in the company’s quarterly press release.
“Moreover, we realized the fewest residential voice losses in 15 years. These achievements contributed to strong customer growth in concert with continued value-creating financial results, supported by our team’s relentless focus on providing the best customer experience on our world-leading broadband networks,” Entwistle said.
The good-looking quarter has been followed by a rise in Telus’ share price over the past month and a half, with the stock climbing almost three per cent since the August 2 earnings report. Overall, Telus is up 8.4 per cent for 2019, with the stock hitting an all-time high of $51.21 back in June.
Over the past five years, Telus has gained about 25 per cent in value.
It’s that kind of solid earnings growth matched by incremental share price appreciation which makes Telus both an attractive offer but one which won’t be knocking your socks off, says Campbell.
“Telus is a lot like any of the telecoms — we happen to own BCE, not Telus) — in that there’s relatively low growth,” says Campbell, in conversation with BNN Bloomberg on Friday. “The stocks have moved a bit lately because they pay a nice dividend of four to five per cent, depending which one.”
“Valuations are on the upper end of the band. They’re not incredibly expensive but not cheap either. I think you’re looking at three to five per cent plus dividend, so a good place to hide in an uncertain market,” he says.
“But don’t expect [Telus] to be $54 anytime soon. It wouldn’t surprise me if it’s $50 in a year from now. You might get a little more as you get earnings growth — probably three-to-five per cent earnings growth, [the stock] will grow with that,” Campbell says.
Telus currently offers a dividend yield of 4.6 per cent, which compares to its industry peers at 4.9 per cent for BCE, 3.0 per cent for Rogers Communications, 4.4 per cent for Shaw Communications and 1.4 for Quebecor.