Canada’s telecommunications companies have long been known as great defensive plays for investors looking to pick up a solid and secure dividend while gaining a few points per year in share price to boot.
And while names like BCE (BCE Stock Quote, Charts, News, Analysts, Financials TSX:BCE), Rogers Communications (Rogers Communications Stock Quote, Charts, News, Analysts, Financials TSX:RCI.B), Telus (Telus Stock Quote, Charts, News, Analysts, Financials TSX:T) and Shaw Communications (Shaw Communications Stock Quote, Charts, News, Analysts, Financials TSX:SJR.B) have historically traded as a group, faring pretty similarly depending on market conditions, investors looking for ways to tell them apart should be focusing on Telus and its side hustles in the technology space. That’s according to portfolio manager Ryan Bushell, who sees not just Telus’ capex infrastructure spend but its forays into healthcare and agriculture tech as key difference makers.
“You’re getting a nice four per cent dividend yield there and I think Telus is the best positioned [telecom company] because they’re the furthest along in their capital expenditure to put fibre to the home,” says Bushell, president of Newhaven Asset Management, who spoke on BNN Bloomberg on Thursday. “They will have continued expenditure in wireless but that is shouldered 50/50 with BCE because of their network sharing agreement, which is awesome for the company.”
“And instead of investing in content like Rogers and BCE did, they’ve been investing vertically in the value chain with agricultural, healthcare and technology investments which are coming to bear fruit over time for them,” he said.
Last year, Telus brought out a new reporting structure with two segments, TELUS Technology Solutions, called TTech, and its digital customer experience segment called TELUS International (DLCX). The latter includes customer experience and digital transformation services including artificial intelligence and content management through TELUS International, while the former, which comprises the bulk of its business, includes Telus’ network revenues and equipment sales from mobile tech, data revenues from items such as internet protocol, television, hosting and IT services, software and data management and analytics services and healthcare software through TELUS Health.
In terms of growth from its businesses, for its latest quarter, Telus’ Q4 2021 reported last month, TTech saw operating revenue grow by $231 million or 6.4 per cent year-over-year, with mobile products and services increasing by 5.0 per cent, fixed products and services up by 12 per cent and TELUS Health up 18 per cent. TELUS International grew its Q4 revenue by 36 per cent. Overall, Telus’ fourth quarter saw consolidated revenue grow by 20 per cent.
“Our performance in the fourth quarter, and for the full year, was characterized by our hallmark combination of robust, high-quality and profitable customer growth, alongside strong financial results,” said CEO and President Darren Entwistle in a February 10 press release. “Our results are buttressed by our highly differentiated and potent asset mix geared towards high-growth, technology-oriented verticals.”
Telus, a $44-billion market cap company with a dividend currently yielding about four per cent, has seen its share price head north rather nicely in recent months. The stock finished the 2021 year with a positive return of 18 per cent and so far in 2022 Telus is up
about another eight per cent.
For Bushell, he says Telus’ strong performance should make it attractive to investors in the telco space.
“I think it’s an incredibly well positioned company,” Bushell said. “You’re likely going to see them come up with another dividend growth plan that I think will be very well received by investors and be the best amongst their peers.”
“I continue to own it. I actually wish I own more of it for clients,” he said.
Furthering its TELUS Health offerings, Telus launched in January its Virtual Pharmacy service which gives users the ability to book appointments for pharmacy video or phone consultations with a licensed pharmacist through the company’s mobile app.
“As we shift to a more digitally-enabled world and more virtual health services become available, we must continue to emphasize the importance of care, compassion, and expertise, providing a more personalized experience that Canadians need and expect when managing their health,” said Jason Kennedy, RPh, general manager, Virtual Pharmacy at TELUS Health, in a press release.