It’s definitely hard to read the market these days, what with all the doom and gloom forecasts matched up with markets having their best month in decades. But smart investors should be thinking about Canadian telecom stocks like Telus (Telus Stock Quote, Chart, News TSX:T) and BCE (BCE Stock Quote, Chart, News TSX:BCE), say Chris Blumas of GlobeInvest Capital Management
Stocks were down on Friday to close out what will go down as a banner month where major indices posted double-digit gains and investors tried to turn the tables on March’s severe downturn. While jobless numbers and economic outlooks continue to point to months if not years of pain ahead, gains were across the board in April led by tech stocks like Amazon and Netflix, while other sectors including the utilities and telecom spaces have shown more modest increases.
Where the S&P 500 Index grew by 12.3 per cent over the month of April, the NASDAQ gained 15.1 per cent and the S&P/TSX Composite gained 10.9 per cent, the risk-on approach was clearly en vogue.
Momentum stocks like Shopify and Tesla posted huge gains of 49 per cent and 50 per cent, respectively, whereas the telecom companies followed more muted declines in March with much less growth in April. Canada’s Big Three telcos, Telus, BCE and Rogers Communications were a wash at a 2.5 per cent gain for Telus, negative 2.1 per cent for BCE and flat for Rogers.
What May will bring is anyone’s guess, but like them a little or a lot, high-dividend defensive names like the telcos are a helpful addition to your portfolio, says Blumas, vice-president at GloveInvest, who spoke to BNN Bloomberg on Wednesday.
“This is a space that we follow quite closely and I think the telecom space is very, very defensive and it has held up very well,” Blumas said. “This is one to me that’s similar to the utilities [but] the valuations aren’t as rich as the utilities names —you’re looking at the telcos in and around 15x to 17x earnings.”
“In this market, that’s a little bit more expensive than other things but I do like Telus and we own BCE and these are names I would be buying in this environment,” Blumas said.
The reason being it’s really tough. You don’t want to make your portfolio and only bet on one thing. And that’s a V-shaped recovery,” he said. “So I think adding utilities, adding some telco, having a diversified portfolio that isn’t an all-in bet on one thing will serve you well if things unfold worse than the stock markets are anticipating today.”
Blumas prefers Canadian over American telcos, saying, “I tend to favour the Canadian ones just because they have higher dividend payouts and they’re more income-centric.
For income names, I look towards the Canadian telcos.” Currently, Telus, BCE and Rogers have dividend yields of 5.0 per cent, 5.8 per cent and 3.4 per cent, respectively.
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