Telus is Canada’s best telco stock, this fund manager says

First Avenue Investment Counsel Chief Investment Officer Brian Madden told BNN Bloomberg’s Market Watch on Sept. 18 that he sees Telus (Telus Stock Quote, Chart, News, Analysts, Financials TSX:T) as “the best telco in Canada,” pointing to a dividend yield of about 7.6% — well above its 10-year average of 5%.

“We think not only is the dividend sustainable, we also think it will grow faster than the other Canadian telcos,” he said, noting that Telus boosted its payout 7% over the last year. “The shares are perking up. We think that’s in part due to the price war between the three big telcos, which started about two years ago, starting to fizzle out, prices stabilizing, so they should all face easier earnings comps.

“Telus, again, we think has got more financial strength and optionality than its other telco peers and is less distracted trying to integrate recent acquisitions and the other big telcos. And finally, Telus, we think, has some unpriced optionality via, for instance, plans to monetize $3-billion of surplus urban real estate via redevelopment into high-rise multi-unit residential. So lots of ways to win here, and a fairly conservative need-versus-want type of business. And we think the shares should rerate higher in the coming year.”

Telus shares have declined 4.0% over the past 12 months and 6.1% over the last five years. On the Street, seven analysts rate the stock “Buy,” 10 “Hold,” and one “Sell,” with a consensus price target of $23.49.

Telus closed Sept. 24 at $21.90.

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