Telus: One Of The Safest And Fastest-Growing Dividends In Telecom – TELUS Corporation (NYSE:TU)

Telus (NYSE:TU) is one of the telecom companies on our list of the best high dividend stocks with safe, growing payouts.

Telecommunication companies have long been a favorite of high-yield income investors, thanks to their utility-like recurring cash flows which typically allow for generous and secure dividends.

While blue chips AT&T (NYSE:T) and Verizon (NYSE:VZ) are the best known U.S. telecoms, there are some high-quality telecom names north of the border as well.

Let’s take a look at Telus, a Canadian blue chip telecom, to see if it appears to be an attractive income stock for our Conservative Retirees dividend portfolio.

Business Overview

Founded in 1993 in Vancouver, Canada, Telus is one of Canada’s big telecom providers with rough one-third of the national wireless market and over 40% of the internet market. The company is especially dominant in Western Canada where it serves a total of 12.7 million customers.

Telus primarily operates in four businesses:

Wireless: 8.6 million customers

Internet: 1.7 million customers

Residential Access Lines: 1.4 million customers (traditional phones)

Cable TV: 1 million customers

Telus reports the internet, phone, and cable TV businesses as part of its wireline (physical connection) business segment.

The company also operates data centers which offer cloud computing solutions (wireline data), as well a pharmacy, medical records, and medical claims management under its subsidiary Telus Health, which is also listed as part of the wireline segment.

Source: Telus 2016 Fact Sheet

Source: 2016 Q4 Earnings Release

As you can see, Telus’ wireless business is by far the most important in terms of revenue and EBITDA.

Meanwhile, the company’s internet and cable TV businesses are the fastest-growing units, while its legacy phone business is in secular decline – a trend that most telecoms around the globe are dealing with.

Business Analysis

At first glance, Telus’ recent top and bottom line growth appears potentially troubling. However, that’s largely due to currency fluctuations between the U.S. and Canadian dollar.

Source: Simply Safe Dividends

Also note that the apparent sharp decline in free cash flow (FCF) per share is largely due to Telus’ recent aggressive investment phase, which saw capital expenditures (i.e. investments in their networks) grow from 1.8 billion CAD in 2007 to an all-time high of 4.6 billion CAD in 2015, according to Morningstar.

Metric 2007 2016 CAGR
Revenue 9.074 billion CAD 12.799 billion CAD 3.9%
EPS 1.88 CAD 2.06 CAD 1.0%
FCF per Share 2.10 CAD 0.54 CAD -14.0%

Source: Morningstar

In addition, Telus has been undergoing a long-term corporate restructuring as it pivots away from its legacy phone business and towards faster-growing and more profitable wireless, internet, and pay TV businesses.

Telus became Canada’s largest wireless company in 2000 when it agreed to acquire Clearnet Communications for $6.6 billion. The deal transformed Telus from a regional phone…

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