Dividend stocks: Smartphone contracts keep cash flowing for Telus

Dividend stocks: Telus smartphone image

TELUS CORP. (Toronto symbols T and T.A; www.telus.com) gets most of its growth from wireless services. Its 7.3 million subscribers across Canada now supply 52% of its earnings.

The remaining 48% of Telus’s earnings comes from its wireline division, which mainly consists of 3.6 million traditional phone customers in B.C., Alberta and eastern Quebec. This division also includes 1.3 million Internet users and 509,000 TV customers.

Telus added 369,000 wireless subscribers (net of deactivations) in 2011. That’s down 17.4% from a net gain of 447,000 users in 2010, mainly due to the loss of a contract with the federal government.

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Even so, Telus continues to benefit as more of its subscribers opt for smartphones. These users now account for 53% of Telus’s wireless subscribers under long-term contracts, up from 33% a year earlier.

Telus also sells most of its smartphones under long-term contracts, which makes it harder for users to switch providers. Customers under long-term contracts now account for 83.5% of its total wireless customers, up from 81.8% a year earlier.

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Dividend stocks: Telus plans to merge two classes of shares into one

Telus’s overall revenue in 2011 rose 6.2%, to $10.4 billion from $9.8 billion in 2010. Wireless revenue rose 9.0%, while wireline revenue rose 3.3%. Earnings rose 15.5%, to $1.2 billion from $1.05 billion. Earnings per share rose 14.4%, to $3.74 from $3.27, on more shares outstanding.

Telus now plans to merge its common and class A non-voting shares into a single class of shares. If shareholders approve, each non-voting share will become one common share.

Telus also recently raised its quarterly dividend by 5.2%, to $0.61 a share from $0.58. The new annual rate of $2.44 yields 4.3% for both classes.

In the latest edition of The Successful Investor, we look at the potential risks and rewards of the company’s decision to increase spending on its wireless and high-speed Internet networks. We also consider the possible consequences of its plan for a single class of shares and the sustainability of its current dividend. We conclude with our clear buy-sell-hold advice on the stock.

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Comments

  • Phil Tillman

    My wife and all my married daughters use cell phones.
    They bought me one and paid for time. I used it once in three months. They bought it for the old man’s emergency use. I am 78. I can’t stand the attitude (rudeness) of people with these items, and the complaints they make about charges.
    There is a market for people like me that will purchase their own device for true emergency use. And use it on a pay for call basis.
    I am not a dodering old fool, I own a PC (two moitors)
    Mac Book Pro, and iPod. I watch these things interfere with my grandkids getting an education.

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