Why a banker makes sense as Telus’s new boss

Newhaven Asset Management analyst Rebecca Teltscher says the market may be underestimating the implications of TELUS’s (TELUS Stock Quote, Chart, News, Analysts, Financials TSX:T) pending leadership change.

Speaking on BNN Bloomberg’s Market Call on Feb. 17, Teltscher said she was encouraged by the company’s decision to appoint former CIBC chief executive Victor Dodig as its next CEO, even as the stock has traded lower since the announcement.

TELUS said Feb. 12 that longtime President and CEO Darren Entwistle will retire June 30 after 26 years in the role. The board appointed Dodig, who has served as an independent director since May 2022, as President and CEO effective July 1. He will join the leadership team full time May 1 as CEO designate to ensure a smooth transition.

“It was surprising bringing in a banker to run the company,” Teltscher acknowledged. “But look what he did at CIBC. He was able to bring out a lot of growth there.”

She argued that TELUS’s priorities over the next few years, including debt reduction and potential asset monetizations, align with Dodig’s background.

“They need to bring debt down. They need to monetize some assets. Some of it’s going to be maybe the sale of TELUS Health. Maybe it’s going to be the sale of some real estate,” she said. “These are all things that Dodig has experience in as a banker. I do think that maybe they do need a banker right now to be able to get the company in a financial position that they need to be in.”

Teltscher noted that TELUS is already a structural leader among Canadian telecoms, growing faster than peers and further along in its fibre-to-the-home buildout, with capital expenditures beginning to moderate.

The stock’s weakness, she suggested, may reflect speculation around the dividend. TELUS paused dividend growth late last year, halting its twice-annual increases and gradually reducing its DRIP discount, but did not cut the payout.

“Do they need to cut the dividend? No. Will they cut the dividend? I don’t know,” she said. “If they do cut the dividend, I don’t think the stock is going to get hammered.”

In the meantime, Teltscher said she is comfortable collecting the current yield, which sits near nine per cent.

TELUS shares are down 15.55% over the past 12 months and closed Feb. 18 at $18.58. Of the analysts covering the stock, eight rate it “Buy,” eight “Hold,” and two “Sell,” with a consensus price target of $21.34.

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