Friday, September 19, 2014

Telus Corp.

I do not own this stock of Telus Corp. (TSX-T, NYSE-TU). I started to follow this stock because of a list of stock John Sartz talked about in 2008. At the Toronto Money Shows in 2009 and 2010 Aaron Dunn from KeyStone Financial Publishing Corp talked about having recommended this stock.

Aaron Dunn says he likes companies with resilient business models, which are profitable and are growing their earnings. He also like companies with strong management teams, health balance sheets and compelling valuations. They look at the P/E and the Price/Cash Flow ratios. Telus Corp (TSX-T) was one of three stocks he recommended in 2009.

What you first notice about this company is that growth in revenue, earnings and cash flow is better over the last 10 years than over the last 5 years. This is most notable with earnings and cash flows. The number of outstanding shares have move slightly lower over the past 5 and 10 years and shares have decrease by 0.38% and 1.2% over these periods.

If you look at growth in revenue per share it is at 3.8% and 6.1% per year over the past 5 and 10 years. EPS has grown at 2.8% and 16% per year over the past 5 and 10 years. It is not surprising that EPS growth has slowed and growth in revenue was much lower over the last 10 years. CFPS has grown at 2% and 5% per year over past 5 and 10 years.

Dividends are also growing faster than revenue. The dividends have grown at the rate of 8% and 18% per year over the past 5 and 10 years. Dividends were increased twice in 2014 for growth at 5.9% and 5.6% for a total growth of 11.8% for 2014.

The 5 year median Dividend Payout Ratios are 60.50% and 24.50% for EPS and CFPS. The DPRs for 2013 were not far off with DRP for EPS at 65% and for CFPS at 26.9%. This stock is generating a good dividend yield and good growth in dividends. The current dividend yield is 3.81% and the 5 year median is 4.17%. As I have mentioned above, dividends have grown at 8% and 18% over the past 5 and 10 years.

The Return on Equity has been over 10% each year of the last 5 years. The ROE for 2013 was at 16.1% and the 5 year median is 16.1%. The comprehensive income and net income varies a lot. For 2013 the ROE on Comprehensive Income was 28.5% a value some 76% higher. However, ROE on comprehensive income was 28% lower than that for net income in 2012.

The debt ratios are ok, but the company relies on cash flow to cover current liabilities. The Liquidity Ratio for 2013 was just 0.71. This means that current assets cannot cover current liabilities. If you add it cash flow after dividends, the ratio is 1.02. The Debt Ratio is 1.59. Leverage and Debt/Equity Ratios for 2013 were at 2.69 and 1.69.

The 5 year low, median and high median Price/Earnings per Share Ratios are 12.17, 13.79 and 15.41. The corresponding 10 year values are slightly higher at 13.45, 15.38 and 16.94. The current P/E ratio is 16.96 based on a stock price of $39.85 and 2014 EPS estimate of $2.35. This stock price test suggests that this stock is expensive.

I get a Graham Price of $26.48 and the 10 year low, median and high medina Price/Graham Price Ratios are 1.08, 1.24 and 1.43. The current P/GP Ratio is 1.51 based on a stock price of $39.85. This stock price test suggests that this stock is expensive.

However, if you look at dividend yield, it is suggesting that the stock price maybe reasonable. The 5 year median Dividend Yield of 4.71% is just 8.5% higher than the current Dividend Yield of 3.81%. The historical average Dividend yield is 4.12% and the historical median Dividend Yield is 3.91%. These are just 7.3% and 2.5% higher than the Current Dividend yield.

When I look at analysts' recommendations I find Buy and Hold recommendations. The consensus recommendation would be a Buy. The 12 month target stock price is $43.70. This implies a total return of 13.48% with 3.81% from dividends and 9.66% from capital gains.

There is an interesting article in the Toronto Star about this company issuing a first transparency report. There is a recent Motley Fool report about why this stock is a must have one for dividend investors.

Sound bit for Twitter and StockTwits is: Dividend growth stock in Telecom sector. See my spreadsheet at tel.htm.

I will have only one entry for this stock as I must do on some stock because I cover too many stocks to do double entries on all that I follow.

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. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.

See my website for stocks followed and investment notes. Follow me on Twitter or StockTwits.


  1. I just want to let you know how much I learn and how much I appreciate your articles. Thank you