Telus Corp.

Sound bite for Twitter and StockTwits is: Stock price is reasonable to expensive. It is only in the dividend yield testing that this stock is showing up as cheap. I like this testing because it does no use estimates and it uses current information. However, the P/BV testing also does not use estimates and here the stock is showing as expensive. The stock has debt ratios vulnerability. See my spreadsheet on 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.

Dividend is moderate and the dividend increases are moderate to good. The current dividend is 3.96% based on a stock price of $42.45 and dividends of $1.68. Dividends have grown by 9.3% and 17.6% per year over the past 5 and 10 years. Dividend growth tends to fluctuation with how well a company is doing. This often depends on how well the economy is doing.

Dividend Payout Ratios are good. The DPR for 2014 for EPS was 64.1% and for CFPS was 26%. The 5 year median DPR for EPS was 60.6% and for CFPS was 24.90%. DPR for these values for 2015 are expected to be similar.

Shareholders have done well with the 5 and 10 year total return at 17.85% and 9.24% per year. The portion of this return attributed to dividends is 4.55% and 3.34% per year. The portion of this return attributed to capital gain is 13.30% and 5.90% per year.

Outstanding shares have decreased by 0.8% and 1.6% per year over the past 5 and 10 years. Revenue growth has been moderate. EPS growth has been good and Cash Flow growth has been moderate.

Revenue has grown at 4.6% and 4.7% per year over the past 5 and 10 years. Revenue per share has grown at 5.4% and 6.4% per year over the past 5 and 10 years. Revenue is expected to growth about the same in 2015.

EPS has grown by 8% and 11.5% per year over the past 5 and 10 years. Analysts expect EPS to grow about 9% in 2015. Cash Flow has grown by 6.2% and 3.4% per year over the past 5 and 10 years. Analysts expect Cash Flow to grow around 6% in 2015.

Debt Ratios could be better. The Liquidity Ratio for 2014 is just 0.62. That means that current assets cannot cover current liabilities. If you had added in cash flow after dividends, this ratio becomes 1.34. I prefer this ratio to be 1.50. Also, this points out that the company depends on cash flow to fund current liabilities. This is vulnerability.

The Debt Ratio is 1.47. I prefer this also to be 1.50. The reason I like the ratios to be 1.50 is to give a margin of safety. Leverage and Debt/Equity Ratios are a little high at 3.11 and 2.11.

The Return on Equity has been above 10% each year for the past 10 years. The ROE for 2014 is 19.1% and the 5 year median is 16.2%. The ROE on comprehensive income for 2014 is lower at 13.2% and its 5 year median is 13.2%. When the ROE on comprehensive income is lower than for the net income, it suggests that the earnings may not be of good quality or as good as they appear.

There is not much in the way of insider ownership. However one officer owns shares worth $6.2M and the chairman owns shares worth $1.6M. But both of these only add up to around 0.03% of the outstanding shares. In 2014 the outstanding shares were increased due to stock options by 1.4M shares. These stock options represent some 0.24% of the outstanding shares. These numbers of shares were worth $60.6M at the end of 2014.

The 5 year low, median and high median Price/Earnings per Share Ratios are 13.87, 15.12 and 16.36. The corresponding 10 year values are close at 13.66, 15.38 and 16.94. The current P/E Ratio is 16.85 based on a stock price of $42.45 and 2015 EPS estimate of $2.52. This stock price testing suggests that the stock price is relatively expensive.

I get a Graham Price of $26.48. The 10 year low, median and high median Price/Graham Price Ratios are 1.17, 1.36 and 1.49. The current P/GP Ratio is 1.60. This stock price testing suggests that the stock price is relatively expensive.

I get a 10 year median Price/Book Value per Share Ratio of 2.41. The current P/BV Ratio is 3.43 based on a stock price of $42.45 and BVPS of $12.37. The current P/B Ratio is some 42.6% higher than the 10 year median ratio. The current P/GP Ratio is 1.60. This stock price testing suggests that the stock price is relatively expensive. A P/B Ratio of 3.43 is a little high. For example, 70% of the stocks I follow have a P/B Ratio of 2.12 or lower.

The current dividend is 3.96% based on a stock price $42.45. The 5 year median dividend yield is 3.92%. The current dividend yield is some 1% higher than the current dividend yield. This stock price testing suggests that the stock price is relatively reasonable and around the relative median.

The historical median dividend yield is 3.91%. This is some 1.2% lower than the current dividend yield of 3.96%. This stock price testing suggests that the stock price is relatively reasonable and around the relative median.

When I look at analysts' recommendations, I find Strong Buy, Buy and Hold recommendations. Most recommendations are a Buy with Holds a close second. The consensus recommendation would be a Buy. The 12 month consensus stock price is $45.90. This implies a total return of 12.08% with 3.96% from dividends and 8.13% from capital gains.

Motley Fool's Andrew Walker has identified Telus as a top dividend growth stock. There is an interesting article in Business Vancouver about Telus issuing a Green Bond to bankroll their B.C. Tower.

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.

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