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.
When I was updating my spreadsheet, I noticed the 20 year total return was low at 6.41% compared to the other total returns. This case shows that sometimes a stock gets overpriced and that is not the time to buy. If you pay too much for a stock, it can badly affect long term results.
The dividend yields are moderate (2 and 3%) to good (4% and over). The current dividend yield is 4.35% with 5, 10 and historical yields at 3.92%, 4.22% and 3.91%.
Dividends growth has varied over the years. They increased since 2005, but before that they declined and were flat some years. As you can see in the chart below, the dividend increases have been good over thee last 5, 10 and 15 years, but the increases are currently slowing down.
The Dividend Payout Ratio for 2017 is 79% with 5 year coverage at 74%. This is acceptable for a utility. The DPR for CFPS for 2017 is 29% with 5 year coverage at 29%. This is also fine.
The Long Term Debt/Market Ratio for 2017 is fine at 0.43. The Liquidity Ratio is low at just 0.56. This means that current assets cannot cover current liabilities. If you add in cash flow after dividends it is only 1.09. If you add back in the current portion of the long term debt it is 1.50. This 5 year median is also low at 1.15 with cash flow and 1.45 with long term debt added back. This is a vulnerability.
The Debt Ratio is also low at 1.39 with 5 year median at 1.41. This is also a vulnerability. I prefer this to be at 1.50. The Leverage and Debt/Equity Ratios are a little high at 3.58 and 2.58 respectively. The 5 year median ratios are better at 2.68 and 1.68.
The Total Return per year is show below for years of 5 to 23. Under the Capital Gain column is the portion of the Total Return attributable to capital gains. Under the Dividend column is the portion of the Total Return attributable to dividends. See charts below.
From the chart below, you can see that the total return over the past 5, 10 and 15 years is good, but it is decreasing.
| Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|
| 5 | 10.33% | 12.18% | 7.91% | 4.27% |
| 10 | 19.55% | 10.62% | 6.78% | 3.84% |
| 15 | 13.27% | 16.61% | 11.98% | 4.63% |
| 20 | 5.76% | 6.41% | 3.82% | 2.59% |
| 23 | 5.21% | 9.75% | 6.18% | 3.57% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 17.20, 18.51 and 19.64. The corresponding 10 year ratios are 14.35, 15.94 and 17.53. The corresponding historical ratios are 14.84, 17.92 and 19.83. So, you can see that the P/E Ratios are going up for the 5 year durations due to rising price but that the 10 year duration went down from the historical due to price decline. The current P/E Ratio is 18.03 based on a stock price of $48.31 and 2018 EPS estimate of $2.68. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get a Graham Price of $31.29. The 10 year low, median, and high median Price//Graham Price Ratios are 1.22, 1.36 and 1.49. The current P/GP Ratio is 1.54 based on a stock price of $48.31. 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 2.60. The current P/B Ratio is 2.97 based on a stock price of $48.31, Book Value of $9,679M, and Book Value per Share of $16.24. The current P/B Ratio is 14% above the 10 year ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get an historical median dividend yield of 3.91%. The current dividend yield is 4.35% based on dividends of $2.10 and a stock price of $48.31. The current yield is some 11% above the historical yield. This stock price testing suggests that the stock price is relatively reasonable and below the median.
The 10 year median Price/Sales (Revenue) Ratio is 1.83. The current P/S Ratio is 2.04 based on 2018 Revenue estimate of $14,111M, Revenue per Share of $23.68 and a stock price of $48.31. The current ratio is some 11% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median.
My least liked stock price testing is using the P/E Ratio. In this case the P/E Ratio seems a bit volatile and it is going up because the price part is going up without a corresponding rise in earnings. On of my favorites is the dividend yield test because you use current information and not estimates. However, the yield is going up because they are paying out a higher portion of the earnings. The P/B Ratio and P/S Ratios are very often good tests. For this stock they show that the stock price is relatively reasonable but above the median. This is probably right.
When I look at analysts’ recommendations I find I find Strong Buy (2), Buy (11) and Hold (6). The consensus would be a Buy. The 12 month stock price is $50.83. This implies a total return of 9.56% with 5.22% from capital gains and 4.35% from dividends.
Andrew Walker on Motley Fool talks about why you should have this stock in your RRSP. Peter Morris on Simply Wall Street discusses Telus Corp’s P/E Ratio. Ted Liu on Private Capital Journal talk about Telus Corp’s purchase of Medisys Health Group Inc. Michael Canly on Simply Wall Street talks about the company’s debt levels. See what analysts are saying about this stock on Stock Chase. Most analysts like it and some mention its high P/E Ratios.
TELUS Corp is engaged in providing phone, Internet access, and television services to residential and business customers. It also offers cloud-based services to business customers through its data centers. Its web site is here Telus Corp.
The last stock I wrote about was about was Accord Financial Corp (TSX-ACD, OTC-ACCFF) ... learn more. The next stock I will write about will be Wajax Corp. (TSX-WJX, OTC-WJXFF) ... learn more on Friday, September 21, 2018 around 5 pm. Tomorrow on my other blog I will write Toronto Money Show.... learn more on Thursday, September 20, 2018 around 5 pm.
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. I have three blogs. The first talks only about specific stocks and is called Investment Talk. The second one contains information on mostly investing and is called Investing Economics Mostly. My last blog is for my book reviews and it is called Non-Fiction Mostly. Follow me on Twitter or StockTwits. I am on Instagram. Or you can just Google #walktoronto spbrunner8166 to see my pictures.
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