This is a stock (TSX-T) that I track, but do not own. This stock is in the Telecommunications section of the stock market, which I think is a rather risky area. Companies, like Bell used to be considered to be Widows and Orphan stocks, but not any more. This is a competitive and fast moving technological sector now and I think that it is currently quite risky. I have very little of my portfolio in this sector. I think you can do as well, with less risk, in other retail areas.
This stock has mixed record when it comes to dividends. The 5 and 10 year growth in dividend is 26% and 1% per year, respectively. This is because this stock had a rough ride in the last recession. I have only tracked the dividends for the last 15 years and they went up nice to 2001. In that year, the dividends went from $1.40 per share to $1.20 per share. They decreased again in 2002 to $.60 per share. They remained at $.60 for several years then start to rise again in 2005 (to $.80 per share).
All the telecommunications companies that I follow reduced or kept their dividend level in the last recession, but this one had the biggest drop in dividends at just under 60%. I follow BCE (TSX-BCE), Manitoba Telecom (TSX-BMT), and Bell Aliant (TSX-BA.UN), as well as Telus Corp (TSX-T).
In Total Returns, you would not have made much in this stock over the 5 or 10 years to the end of financial year 2009. The total return would be about 3%, with 3 to 4% of the total return consisting of dividends. Even with the recent rise in stock price by 37% since the end of 2009, the 5 and 10 year total returns to date, would be around 3%, with dividends making up 3 to 3.5% of the return. This means that the stock price has gone nowhere in both these time periods.
The best 5 and 10 year growth is in earnings, with growth of 15% and 8% per year, respectively. However, this is not as important as growth in revenue and cash flow. The better one is grow in revenue per share, with the 5 and 10 years being at 7% and 2% per year, respectively. The best that can be said for growth in cash flow and book value was that there was some.
When we look at Liquidity and Asset/Liability ratios, we find that the Liquidity Ratios are low coming in at 0.36 and the A/L Ratio much better at 1.71. The reason that the Liquidity Ratio is so low is that the Accounts Payable and Accrued Liabilities are quite high. If the Liquidity ratio is not at least at 1.00, it means that the current assets cannot cover the current liabilities. The one clear good thing is the Return on Equity. The 5 year average ROE is 14.7%. The ROE for the 3rd quarter of 2010 is a little lower, but still good at 13.4%.
So, have there been any recent improvements in this company? First, the Revenue per Share for the first 3 quarters of 2010 is about the same as last year. Earnings are expected to be up 3.5% this year (2010) and 12% net year (2011). However, cash flow is expected to come in lower in 2010 than in 2009 and still not be at the 2009 level in 2011. Book value is up almost 7% for the 3rd quarter of 2010, compared to 2009. Telus raised their dividends some 5.3% in the second part of 2010, so this is good. As, I had already mentioned, the stock price is up some 37% since the end of last year.
So it would seem that 2010 would be an OK, but not great year for this company. I must admit that I am not keen on companies in the telecommunications area as I think there will be lots of technological and regulatory changes in the future. Also, I think that costs for cell phones, internet etc is very high currently. Tomorrow, I will look at what the analysts are saying about this stock.
Telus is a national telecommunications company in Canada. Telus provides a wide range of communications products and services including data, Internet protocol (IP), voice, entertainment and video. Its web site is here Telus. See my spreadsheet at tel.htm.
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website for stocks followed and investment notes. Follow me on twitter.
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