A stable subscriber base and rising cash flow gives this major wireless player plenty of room to keep growing dividend payouts.
The company is well-positioned for future growth now that its multi-year 5G upgrade plan is complete. Improved productivity and infrastructure will help to deliver consistent income for investors.
Meanwhile, the stock trades at 19.0 times the company’s forward earnings forecast.
TELUS CORP. (Toronto symbol T; www.telus.com) is a Canadian wireless carrier with 13.06 million subscribers. It also sells landline phone, Internet and TV services in B.C., Alberta and eastern Quebec.
In the quarter ended March 31, 2024, Telus added 45,000 new wireless phone subscribers as well as 101,000 users of other devices (net of cancellations). However, due to greater competition, the average monthly cellphone revenue per user declined 1.8% to $59.31.
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As a result, the company’s revenue in the quarter fell 0.6%, to $4.93 billion from $4.96 billion a year earlier. That also missed the consensus forecast of $5.01 billion.
However, better productivity lifted earnings before unusual items by 1.0%, to $390 million from $386 million. Due to more shares outstanding, per-share earnings declined 3.7%, to $0.26 from $0.27. Even so, that topped the consensus estimate of $0.23.
Blue Chip Stocks: Payout increases are on the way
Telus increased your quarterly dividend by 3.5% with the July 2024 payment. The new annual rate of $1.5564 yields 7.2%. Moreover, Telus plans to raise the annual dividend rate by between 7% and 10% from 2023 through the end of 2025.
Telus has now substantially completed a multi-year plan to upgrade its wireless networks to handle 5G signal. It has also upgraded most of its copper-line networks to fibre-optic cable.
As a result, the company’s capital spending in 2024 will decline about 8% to $2.6 billion. That should help lift this year’s free cash flow (regular cash flow less maintenance capital spending) by about 24% to $2.2 billion.
Telus will probably pay aggregate dividends of $2.5 billion in 2024, for a payout ratio of 114%. That’s above its target range of 65% to 75%, but that ratio should decline in the next few years as its capital spending continues to decline.
Recommendation in Dividend Advisor: Telus Corp. is a buy.
