Telus will give you a solid return, this investor says

Sure things are a rarity in the market but a name like Telus (Telus Stock Quote, Charts, News, Analysts, Financials TSX:T) may be as close to one as it gets. That’s the call from portfolio manager Brianne Gardner, who thinks investors can rest easy owning a steady-Eddie dividend generator like Telus.

“They typically pay out most of their profits as a dividend, so it’s great for consumers,” said Gardner of Velocity Investment Partners, who spoke on BNN Bloomberg on Friday.

“The return can be flat for periods [but] when you combine the five per cent dividend that Telus is giving you with a three to five per cent, let’s say, price appreciation, you end up making eight to ten per cent over the last three, five and ten years,” she said.

With a market cap at $40 billion, Telus climbed to an all-time high of just over $40 earlier this year, but the second half of 2022 has been less rosy. Telus has now erased a good chunk of the gains it put on during the first two years of the pandemic, putting its three-year share price appreciation now at about 12 per cent. Year-to-date, the stock is currently down about six per cent.

Gardner says the Canadian telecom space offers a fairly recession-proof choice for investors, as people are not going to be ditching their mobile phones, while there are still growth areas for a company like Telus. On the stock’s target price, Gardner pointed to a 20 per cent return over the next 12 months.

“Even if the [share] price is fluctuating or we go into a recession, everyone has to pay their phone bill,” she said.

“Telus tends to trade in that $27 to $30 range, depending on the demand for its dividend and the results in its subscriber base. That’s really one of the unique stats that investment managers look at with telecoms,” she said. “It’s not going to be an out-performer that’s going to have huge growth, but it is a sustainable long term business. It’s a core position that we have in our model, with an average price target on the Street is $33, which would be a 20 per cent return with the dividend.”

Telus last reported its quarterly financials in early November, where the company posted net mobile phone subscriber additions of 150,000 for its third quarter 2022, up 15,000 subs compared to a year earlier and marking Telus’ best quarterly result since 2010. Revenue for the quarter was up ten per cent to $4.671 billion and adjusted EPS grew by 17 per cent to $0.34 per share.