Friday, February 10, 2012

Telus Corp

I do not own this stock (TSX-T, NYSE-TU). They on the dividend lists that I follow of Dividend Achievers (see resources) and Dividend Aristocrats (see indices). However, the Canadian lists do not have very high standards. This company has only consistently raised their dividends since 2005.

The 5 and 10 year growth in dividends is 15% and 10% per year. However, there can be a huge difference in increase. In 2009, 2010 and 2011 increases are 6%, 5% and 10%. As recently as 2001 and 2002, they were decreasing their dividends.

If you had held this stock 5 and 10 years to the end of December 2011, you would have earned 4.9% and 12.3% in total returns. The portion of this total return in dividends was 3.4% and 3.3%. That means that dividends made up 69% and 26.7% of the total return over the past 5 and 10 years.

None of the other growth figures are particularly good. Growth in earnings is 3% and 9.5% per year over the past 5 and 10 years. Growth in revenue per share is 4.5% and 3.2% per year for the past 5 and 10 years. Growth in Cash Flow is 0% and 6.2% per year over the past 5 and 10 years. Growth in Book Value is 2.3% and 0% per year over the past 5 and 10 years.

The Return on Equity has been quite good lately, with ROE for the financial year ending December 2011 at 16.2% and the 5 year median at 15.7%. However, we should be a bit cautious about the ROE for 2011 as the ROE based on comprehensive income is only 5%, a much lower figure. The statements for 2011 have just been published and they are unaudited.

The debt ratios are mostly fine, except for the Liquidity Ratio which is current at 0.53. If this figure is not at least at 1.00, then current assets do not cover current liabilities. The Asset/Liability Ratio is good at 1.61. The current Leverage and Debt/Equity Ratios are ok at 2.65 and 1.65, respectively.

When I look at insider trading I find some $3.1M insider selling. Selling is by CEO, CFO, officers and Directors. There is minimal insider buying by CEO and directors for a net insider selling of $2.5M. Everyone but directors have more options than shares. The insiders seem to have been selling off option shares. There are some 153 institutions that hold some 30% of the shares of the company. Over the past 3 months they have bought and sold shares and over the past 3 months decreased their shares by 3.4%.

When I look at analysts’ recommendations, I find Strong Buy, Buy, Hold and Underperform. The consensus would be a Hold. There are an awful lot of Hold recommendations on this stock. One analyst with a Hold recommendation is worried about competitive and regulatory pressures in the wireless industry. A Hold recommendation comes with a 12 months stock price of $58.03.

One analyst thought the only reason to hold this stock is for the yield as there will not be much future capital gains. (Yield is currently at 4%.) One analyst said to buy for some capital gain and for dividend growth.

Globe and Mail has a recent article called Telus profit rises on TV, data growth.

I get 5 year median low and high Price/Earnings Ratios of 10.10 and 14.81. The current P/E of 14.03 on a stock price of $56.83 is towards the relatively high side. I get a Graham Price of $45.90. The current stock price of $56.83 is some 23% higher. The 10 year median and high difference between the Graham Price and stock price is the stock price being from 9% to 34% higher. So, this shows a stock price towards the high side.

I get a 10 year median Price/Book Value Ratio of 1.90 and a current P/B Ratio of 2.46, which is 30% higher. The current dividend yield of 4.08% is some 8% lower than the 5 year median dividend yield of 4.42%. These tests show a relatively high current stock price.

You should not only look at the relative position of the current stock price, but also future expectations. Generally it is not a good idea to buy a stock when it is relatively high. However, when you consider this stock is relatively high and that there are concerns of future competitive and regulatory pressure, I can why so many analysts give a Hold recommendation.

See Dividend Ninja’s take on this stock at Telus and at Telus2. See also the Dividend Guy take on this stock at Telus.

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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