Telus (TU) is a Canadian telecom that few Americans have likely heard of.
While I am a fan of the American telecoms, I do think that that the Canadian telecom landscape has its own set of unique advantages. For that reason, they’re also worth owning in addition to the U.S. telecoms, or even over them if the price is right. Today, Telus provides a good combination of growth, and a sizeable upfront dividend yield that’s just below 5%.
While you could achieve far greater yields with the likes of an AT&T (T), or solid growth from a T-Mobile (TMUS), I find it tough to find the perfect blend of both from one single stock in the U.S. (See Analysts’ Top Stocks on TipRanks)
Canada’s Big 3 telecoms
In Canada, the Big Three telecoms of Telus, BCE (BCE), and Rogers Communications (RCI) dominate. They’ve got a bit of a triopoly, and competition is considerably less fierce than it is in the U.S. So, you won’t find jaw-dropping promotions for switching telecom providers in Canada.
Being a member of a triopoly comes with greater pricing power. The power of the Big Three Canadian telecoms has been a hot topic issue in Canadian politics, with NDP (New Democratic Party) leader Jagmeet Singh previously noting that they were effectively “ripping Canadians off.”
Other political leaders have also taken aim at the Big Three Canadian telecoms, noting of the high prices for mobile data versus rates enjoyed by Americans south of the border.
With recent consolidation activity in Canada, with Rogers acquiring number four telecom Shaw Communications, it’s clear that the power of the Big Three can only increase from here.
The Liberal minority government had made promises to take action in the past. With the recent Shaw-Rogers merger, it’s unlikely that any effort to lower wireless rates in Canada will happen anytime soon.
Too Cheap for Its Own Good
Telus, a growing telecom that’s comparable to a T-Mobile, in that it has a considerable amount of brand affinity for great customer service and network quality, seems like an undervalued way to play the unique Canadian telecom space.
Shares of the $28-billion company have slid around 5% from their high, alongside the rest of the telecom scene. The dividend has swollen accordingly, and the valuation seems too good to pass up for investors who want a T-Mobile-like play.
We all know T-Mobile. It’s a top performer that’s worth paying up for. While Telus may not be growing at the same magnitude, it does have an opportunity to take share in the Big Three space, which seems well insulated from any external competitive disruptions.
Given Telus’ distinct advantages, and a more favorable market environment that comes with higher prices charged to consumers who don’t have as many alternatives, Telus stock deserves to trade at more than just 31.1 times trailing earnings.
Wall Street’s Take
According to TipRanks’ consensus analyst rating, T.U. stock comes in as a Strong Buy. Out of eight analyst ratings, there are seven Buy recommendations, and one Hold recommendation.
The average Telus price target is $25.05. Analyst price targets range from a low of $22.53 per share, to a high of $26.56 per share.
Disclosure: Joey Frenette doesn’t own shares of any mentioned companies at the time of publication.
Disclaimer: The information contained in this article represents the views and opinion of the writer only, and not the views or opinion of Tipranks or its affiliates, and should be considered for informational purposes only. Tipranks makes no warranties about the completeness, accuracy or reliability of such information. Nothing in this article should be taken as a recommendation or solicitation to purchase or sell securities. Nothing in the article constitutes legal, professional, investment and/or financial advice and/or takes into account the specific needs and/or requirements of an individual, nor does any information in the article constitute a comprehensive or complete statement of the matters or subject discussed therein. Tipranks and its affiliates disclaim all liability or responsibility with respect to the content of the article, and any action taken upon the information in the article is at your own and sole risk. The link to this article does not constitute an endorsement or recommendation by Tipranks or its affiliates. Past performance is not indicative of future results, prices or performance.
