Friday, August 23, 2013

Telus Corp

I do not own this stock Telus Corp (TSX-T, NYSE-TU). I started to follow this stock because people I liked reading liked this stock. John Sartz talked about it in 2008 and then at the 2009 and 2010 Aaron Dunn of KeyStone Financial Publishing Corp talked about this stock. This will be a one day report as I have too many stocks on my list to cover to do two day reports on them all.

This stock has not done badly by investors as far as dividends go. I have dividend information going back to 1994 and in most years, with some exceptions, they have increased their dividends. They, as did all telecom stocks, had a rough time with the 2000 bear market and recession. In 2000, dividends were flat; they were decreased in 2001 and then remained flat until 2004. The drop in dividends was around 60% in 2001. However, when increases started again in 2005, dividends were increased by 33% and then by 37% in 2006.

The 5 and 10 year growth in dividends is at 9.67% and 17.2% per year. The most recent dividend increase was in 2013 for 6.3%. However, this is the second increase for 2013 and total increase for 2013 is at 11.5%. The current dividend is at 4.27%, which is a good dividend and the 5 year growth rate of 9.67% is very good also.

This means potentially after 10 years, if this continues, you could be earnings come 10.7% return on money invested today. If you look at history, people who invested 10 years ago are earnings around 12.9% on their investment. However, if you look at what people who invested 15 years ago are earning, it is lower at 6%. This is because 15years ago the stock price was higher than what it was 10 years ago.

The Dividend Payout Ratios for this stock are good with the 5 year median DPR for earnings at 59% and the 5 year median DPR for cash flow at23.5%. The DPR for the last financial year was similar and for 2013 the DPRs are expected to be a bit higher at 63% for earnings and 27% for cash flow.

As with utility stocks, this company relies on cash flow to get to a Liquidity Ratio of more than 1.00. The current Liquidity Ratio is 0.70 and this means that current assets cannot cover current liabilities. If you add in the cash flow after dividends you get a Liquidity Ratio of 1.38. (I prefer to see this ratio at 1.50.)

The Debt Ratio is better and the current one is at 1.56. The current Leverage and Debt/Equity Ratios are ok at 2.78 and 1.78.

When you look at growth, I find that EPS is growing a lot faster than revenue or cash flow. Looking at 5 year running averages growth, I find over the past 10 years Revenue per Share has grown at 3.2% per year, cash flow per share at 3.6% per year, but EPS at 17.2% per year. Earnings do tend to fluctuate on this stock.

The Return on Equity is good coming in at 17.1% for the 2012 financial year. However, this is quite a bit higher than the ROE on comprehensive income which was lower by some 28% at 12.3%. If you look at ROE on net income and comprehensive income over the past 12 months to the end of June 2013, there is still a big spread of 25%. (The problem with divergence of net income and comprehensive income is that the earnings may not be as good as they may appear to be.)

When I look at my stock tests, I find that the Price/EPS Ratio test, the Price/Graham Price test (GP at $23.21) and the Price/Book Value Test (with 10 year P/B Ratio at 2.08) all show that the stock price is rather high. For example, the 5 year low median and high P/E Ratios are 10.10, 12.46 and 14.81. The current P/E Ratio is 15.25 and suggests that the stock price is relatively high. The current P/E is based on a stock price is $31.88 and 2013 earnings of $2.09.

However, the Dividend Yield test suggests that the stock price is reasonable. The current dividend yield is 4.27% and the 5 year median dividend yield is 4.42%. The current dividend yield is just 3.5% lower than the 5 year median.

When I look at the analysts' recommendations, I find Strong Buy, Buy, Hold and Underperform recommendations. The consensus recommendation would be a Buy. The 12 month stock price consensus is at $34.90. This implies a total return of 13.74% with 4.27% from dividends and 9.47% from capital gains.

Insider Monkey talks about Hedge funds being bullish about this stock and insiders being neutral about this stock. The blogger Sunny talks about the recent split in Telus' stock. And, lastly, Pro Active Investors bloggers talk about Telus' second quarter.

What I have not talked about and it is what most news for the telecoms is about, is the current sale of wireless spectrum by the Canadian Government. I do not think anyone knows how this is going affect the telecoms in the long run.

Currently I think that an investment in a Telecom company at present is rather risky. It has not been a favourite sector of mine for a while. Telecom rates are high in Canada, so there has to be some sort of shake out sometime in the future. See my spreadsheet at tel.htm.

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.

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 or StockTwits.

1 comment:

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