Is it a good company at a reasonable price? It is interesting that Stock Chase, a Canadian site, gives this stock 5 stars out of 5, but the Simply Wall Street, an American site, gives it 2 and one half stars out of 5. Total Return over long periods have been quite low (below 8%), so this is a negative. There is a risk because of the high Dividend Payout Ratios and this is a negative. The dividend yield (6.37%) is almost at the historical high (6.86%) so it could be quite cheap and this is a positive. Analysts do not think it will cut the dividend, in fact, mostly they think the company will raise them and so this is also a positive. If nothing else, this stock can provide passive income. My testing results is pointing to a reasonable price.
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 that some estimates have fallen. Last year AEPS was expected at $1.27, but it came in at $1.17. So, the AEPS for 2023 was lowered from $1.44 to $0.95 and 2024 from $1.71 to $1.20. AEPS for 2025 is expected at $1.39. The same is true of EPS. It was expected to be $1.21 in 2022 but came in at $1.15. Estimates for 2023 were lowered from $1.33 to $0.54 and for 2024 from $1.56 to $1.12. The estimate for 2025 is $1.36.
It is similar for Cash Flow per Share where it was expected at $3.41 but came in at $3.36. The value for 2023 was lowered from $3.93 to $2.80 and for 2024 from $4.69 to $4.10. The Cash Flow per Share (CFPS) for 2025 is expected at 4.72.
The chart below shows growth over past 5 and 10 years. They have Revenue and Cash Flow growth and that is good. For 2022, AEPS has started to grow again. Year to date the stock price is down again by some 13%. The market has been going up and down a lot since the start of the year. TSX is up by 4% year to date. However, S&P/TSX Capped Communication Services Index, which this company is in, is down 10% this year.
| Year | Item | Tot. Growth | Per Year |
|---|---|---|---|
| 5 | Revenue Growth | 38.39% | 6.71% |
| 5 | AEPS Growth | -11.03% | -2.31% |
| 5 | Net Income Growth | 10.62% | 2.04% |
| 5 | Cash Flow Growth | 21.89% | 4.04% |
| 5 | Dividend Growth | 36.97% | 6.49% |
| 5 | Stock Price Growth | 9.74% | 1.88% |
| 10 | Revenue Growth | 68.59% | 5.36% |
| 10 | AEPS Growth | 17.29% | 1.61% |
| 10 | Net Income Growth | 22.53% | 2.05% |
| 10 | Cash Flow Growth | 49.46% | 4.10% |
| 10 | Dividend Growth | 123.87% | 8.39% |
| 10 | Stock Price Growth | 60.55% | 4.85% |
If you had invested in this company in December 2012, for $1,009.05 you would have bought 62 shares at $16.28 per share. In December 2022, after 10 years you would have received $618.87 in dividends. The stock would be worth $1,620.06. Your total return would have been $2,238.93. This is a total return would be 9.66% per year with 4.85% from capital gains and 4.81% from dividends.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $16.28 | $1,009.05 | 62 | 10 | $618.87 | $1,620.06 | $2,238.93 |
The current dividend yield is good with dividend growth low. The current dividend yield is good (5% to 6% ranges) at 6.37%. the 5, 10 and historical dividend yields are moderate (2% to 4% ranges) at 4.56%, 4.41% and 4.17%. The dividends have increased at a low rate (less than 8% per year) at 6.5% per year over the past 5 year. The last dividend increase was in 2023 and it was for 3.6%. However, Telus tends to do two increases each year.
Some Dividend Payout Ratios (DPR) are too high, but Analysts expect dividend increases to continue and that the DPRs will moderate in the future. The DPR for Earnings per Share (EPS) for 2022 was 116% with 5 year coverage at 97%. It is expected to be even higher in 2023 at 265%, but then to start to moderate in 2024 to 130%. The DPR for Adjusted Earnings per Share (AEPS) for 2022 was 114% with 5 year coverage at 97%. It is expected to be even higher in 2023 at 150%, but then to start to moderate in 2024 to 121%. The DPR for Cash Flow per Share (CFPS) for 2022 was 38% with 5 year coverage at 35%. This is an important ratio and any ratio 40% or less is good. The DPR for Free Cash Flow (FCF) for 2022 was 163% with 5 year coverage at 213%. It is expected to be even higher in 2023 at 137%, but then to start to moderate in 2024 to 83%. Analysts expect dividend increases to continue and that the DPRs will moderate in the future.
| Item | Cur | 5 Years |
|---|---|---|
| EPS | 115.83% | 96.55% |
| AEPS | 113.85% | 96.55% |
| CFPS | 38.09% | 35.08% |
| FCF | 163.75% | 213.64% |
Debt Ratios are generally not good and need improving. The Long Term Debt/Market Cap Ratio for 2022 is .60 with a current one of 0.69. These are good. The Liquidity Ratio is very low at 0.74. If you add in Cash Flow after dividends, it is better at 1.09, but current one is still low at 0.84. It is only when you add back the current portion of the long term debt is this ratio acceptable for 2022 at 1.57 and currently at 1.39 which is still low. I prefer this to be 1.50 to better. The Leverage and Debt/Equity Ratios are too high for 2022 at 3.06 and 2.06 and are worse currently at 3.17 and 2.17. I prefer these to be under 3.00 and 2.00.
| Type | Year End | Ratio Curr |
|---|---|---|
| Lg Term R | 0.60 | 0.69 |
| Intang/GW | 0.76 | 0.90 |
| Liquidity | 0.74 | 0.63 |
| Liq. + CF | 1.09 | 0.84 |
| Liq, CF DB | 1.57 | 1.39 |
| Debt Ratio | 1.49 | 1.46 |
| Leverage | 3.06 | 3.17 |
| D/E Ratio | 2.06 | 2.17 |
The Total Return per year is shown below for years of 5 to 32 to the end of 2022. 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 chart below.
| From | Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|---|
| 2017 | 5 | 6.49% | 6.61% | 1.88% | 4.74% |
| 2012 | 10 | 18.17% | 9.66% | 4.85% | 4.81% |
| 2007 | 15 | 8.82% | 9.53% | 5.12% | 4.41% |
| 2002 | 20 | 11.54% | 14.85% | 9.36% | 5.48% |
| 1997 | 25 | 5.90% | 6.44% | 3.43% | 3.01% |
| 1992 | 30 | 6.03% | 10.07% | 5.73% | 4.34% |
| 1990 | 32 | 10.47% | 9.59% | 5.43% | 4.16% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are 20.52, 22.53 and 24.54. The corresponding 10 year ratios are 17.42, 18.62 and 19.74. The corresponding historical ratios are 14.84, 17.05 and 18.95. The current P/E Ratio is 42.30 based on a stock price of $22.84 and EPS estimate for 2023 of $.54. This ratio is very high, but the EPS estimate is quite low. The current ratio is above the high ratio of the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
In the above paragraph, the P/E Ratio is very high, but the EPS estimate is quite low. The P/E Ratio drops to 20.39 in 2023 with an EPS estimate of 1.12 and to 16.79 with an EPS estimate of 1.36. The ratio for 2023 is still above the high ratio of the 10 year median ratios. It is only the 2025 P/E Ratio that drops low. However, the longer away the estimate, the more it is unreliable.
I also have Adjusted Earnings per Share (AEPS) data. The 5-year low, median, and high median Price/Adjusted Earnings per Share Ratios are 18.80, 22.46, 26.11. The corresponding 10 year ratios are 15.90, 16.80, 18.06. The current P/AEPS Ratio is 24.04 based on AEPS estimate for 2023 of $0.95 and a stock price of $22.84. This ratio is above high ratio of the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive. In the above paragraph, the P/AEPS Ratio is very high, but the EPS estimate is low. The P/E Ratio drops to 19.03 in 2023 with an EPS estimate of 1.20 and to 16.43 with an EPS estimate of 1.39. The ratio for 2023 is still above the high ratio of the 10 year median ratios. It is only the 2025 P/E Ratio that drops low. However, the longer away the estimate, the more it is unreliable.
I get a Graham Price of $11.74. The 10-year low, median, and high median Price/Graham Price Ratios are 1.44, 1.60 and 1.74. The current P/GP Ratio is 1.95 based on a stock price of $22.84. This ratio is above the high ratio of the 10 year median ratio. 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 2.76. The current P/B Ratio is 2.01 based on a stock price of $22.84, Book Value of $16,407M, and Book Value per Share of $11.34. The current ratio is 27% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
I also have a Book Value per Share estimate for 2023 of $10.80. The Book Value would be $15,628M and the P/B Ratio would be 2.11 based on a stock price of $22.84. This ratio is 23% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
I get a 10-year median Price/Cash Flow per Share Ratio of 7.17. The current P/CF Ratio is 8.16 based on a stock price of $22.84, Cash Flow per Share estimate for 2023 of $2.80 and a Cash Flow of $2.80. The current ratio is 14% above the 10 year median 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 4.17%. The current dividend yield is 6.37% based on dividends of $1.4544 and a stock price of $22.84. The current dividend yield is 53% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively cheap.
I get a 10 year median dividend yield of 4.41%. The current dividend yield is 6.37% based on dividends of $1.4544 and a stock price of $22.84. The current dividend yield is 45% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively cheap.
The 10-year median Price/Sales (Revenue) Ratio is 2.02. The current P/S Ratio is 1.62 based on a stock price of $22.84. Revenue estimate for 2023 of $20,369M, and Revenue per Share of $14.08. The current ratio is 19.6% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
Results of stock price testing is that the stock price is probably reasonable. The dividend yield tests say the stock price is cheap, but it has a problem with some Dividend Payout Ratios being very high. The P/S Ratio test is saying the stock price is reasonable. The rest of the testing range from expensive (earnings) to cheap (Book Value).
When I look at analysts’ recommendations, I find Strong Buy (6), Buy (8) and Hold (3). The consensus would be a Buy. The 12 month stock price consensus is $28.53, with a high of $33.00 and low of $26.00. The consensus price suggests a total return of 31.28% with 24.91% from capital gains and 6.37% from dividends.
Stock Chase. Stock Chase gives this company 5 stars out of 5. For this first part of August analysts were say Do Not Buy. Now it is all Buy. The one Hold says that the sector is struggling with higher rates. Robin Brown on Motley Fool thinks you should buy for passive income and a great yield of 6%. Amy Legate-Wolfe on Motley Fool says this is Blue Chip stock on sale. The company put out a press release on Global Newswire about their fourth quarter of 2022 results. The company put out a Press Release on their second quarter of 2023 results.
Simply Wall Street on Yahoo Finance looks at this company’s dividend payments and are uncomfortable with the high percentage of both its earnings and cash flow paid to shareholders as dividends. Simply Wall Street gives out 4 warnings of dividend of 6.35% is not well covered by earnings or cash flows; interest payments are not well covered by earnings; profit margins (6%) are lower than last year (10.6%) and shareholders have been diluted in the past year. For cash flows they are looking at Free Cash Flow and I generally do not like this metric because often people cannot decide on what the FCF is. The dividend is covered fine by Cash Flow. Shareholders are diluted when a company sells more shares. Simply Wall Street gives this stock 2 and one half stars out of 5.
Telus is one of the Big Three wireless service providers in Canada. It is the incumbent local exchange carrier in the western Canadian provinces of British Columbia and Alberta, where it provides internet, television, and landline phone services. It also has a small wireline presence in eastern Quebec. Mostly because of recent acquisitions, more than 20% of Telus' sales now come from non-telecom businesses, most notably in the international business services, health, security, and agriculture industries. 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 15, 2023 around 5 pm. Tomorrow on my other blog I will write about Money Show 2023 .... learn more on Thursday, September 14, 2023 around 5 pm.
This blog is meant for educational purposes only and is not to provide investment advice. I am not a licensed professional investment advisor. 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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