Telus Corp.

TELUS CORP. $47.65 (Toronto symbol T.A; Shares outstanding: 320.7 million; Market cap: $15.6 billion; TSINetwork Rating: Above Average; Dividend yield: 4.2%; www.telus.com) is Canada’s second-largest telephone company, after BCE Inc. Telus has 6.9 million wireless subscribers across Canada. Its traditional phone business has 3.8 million customers in B.C., Alberta and eastern Quebec. Telus also has 1.2 million Internet subscribers. Its new “Telus TV” service, which operates through phone lines, has just 266,000 subscribers. In the three months ended September 30, 2010, Telus’ earnings rose 6.0%, to $0.89 a share from $0.84 a year earlier. The company earned higher profits from wireless and Internet services. That offset a decline in local and long-distance customers. Telus gets 51% of its earnings from wireless. It added 53,000 wireless subscribers in the latest quarter, up 22.4%. High-profit-margin smartphones account for 28% of its wireless subscribers, up from 18%....

Telus’ focus on the expanding, but highly competitive wireless market gives it a narrower base of business than BCE. That risk is reflected in Telus’ higher p/e and lower yield. Telus is still a buy, but BCE is the more conservative choice. TELUS CORP. $47.65 (Toronto symbol T.A; Shares outstanding: 320.7 million; Market cap: $15.6 billion; TSINetwork Rating: Above Average; Dividend yield: 4.2%; www.telus.com) is Canada’s second-largest telephone company, after BCE Inc. Telus has 6.9 million wireless subscribers across Canada. Its traditional phone business has 3.8 million customers in B.C., Alberta and eastern Quebec. Telus also has 1.2 million Internet subscribers. Its new “Telus TV” service, which operates through phone lines, has just 266,000 subscribers. In the three months ended September 30, 2010, Telus’ earnings rose 6.0%, to $0.89 a share from $0.84 a year earlier. The company earned higher profits from wireless and Internet services. That offset a decline in local and long-distance customers....

Investors are paying more attention to dividend yields (a company’s total annual dividends paid per share divided by the current stock price) as stock markets continue to recover. Companies are responding by doing their best to maintain, or even increase, their dividend payments. That’s good news for investors, because dividends are more dependable than capital gains as a source of income. A couple of decades ago, you could assume that dividends would contribute up to a third of your long-term investment returns, without even considering the tax-cutting effects of the dividend tax credit. Earlier in this decade, dividend yields were generally too low to provide a third of investment returns. But now that yields have moved up and interest rates have moved down, it’s realistic to assume they will once again contribute as much as a third of your total return....

TELUS CORP. $43.80 (Toronto symbol T.A; Shares outstanding: 335.6 million; Market cap: $14.7 billion; TSINetwork Rating: Above Average; Dividend yield: 4.8%; www.telus.com) expects its revenue to rise between 1% and 4% in 2011. As well, its earnings per share should rise 9% to 22%, to between $3.50 and $3.90. The stock now trades at 11.8 times the midpoint of that range. The gains will mainly come from Telus’ recently upgraded wireless and high-speed Internet networks. That’s helping the company attract new customers and deal with new competitors in Canada’s wireless market. Telus is still a buy....

Riverbed Technology Inc., $37.26, symbol RVBD on Nasdaq (Shares outstanding: 73.5 million; Market cap: $2.7 billion, www.riverbed.com), is a leader in wide area network (WAN) optimization. As more workers move outside the office and computer users increasingly access remote datacenters, programs and data that were initially intended for local area networks (LAN) are being slowed down by WAN connections, which have less bandwidth capacity. Riverbed’s products aim to improve the performance of programs, and increase data transmission speed across networks, while lowering the need to add new hardware. Riverbed’s sales and profits are rising. Most important, it’s making sales to large, well-established customers in a range of industries....

PLEASE NOTE: This is our last Hotline for 2010. Our next Hotline will go out on Friday, January 7, 2011. BANK OF MONTREAL, $58.00, Toronto symbol BMO, fell 6% on Friday after it agreed to buy Marshall & Ilsley Corp. (New York symbol MI), which provides banking and financial services through 374 branches in Wisconsin, Indiana, Missouri, Minnesota, Kansas, Arizona and Florida. The purchase doubles the size of Bank of Montreal’s U.S. retail-banking division. The bank is paying roughly $4.1 billion U.S. in stock for Marshall & Ilsley. That’s equal to 12% of Bank of Montreal’s $32.9-billion market cap. It aims to complete the purchase by July 31, 2011....

Shaw Communications, $20.70, symbol SJR.B on Toronto (Shares outstanding: 463.6 million; Market cap: $9.0 billion, www.shaw.ca), is Canada’s largest cable-television operator, with 2.3 million basic cable subscribers in Alberta, B.C., Saskatchewan, Manitoba and Ontario. The company also owns Shaw Direct, which has 902,000 satellite subscribers. Shaw also provides high-speed Internet and telephone services. Shaw trades at 14.7 times this year’s forecast earnings of $1.41 a share. The shares yield a high 4.3%. However, the company faces strong competition for Internet subscribers from Telus Corp., $44.66, symbol T.A on Toronto (Shares outstanding: 320.7 million; Market cap: $14.7 billion). As well, Telus offers an Internet-based television service, which it is planning to expand....

TELUS CORP. $45.12 (Toronto symbol T.A; Shares outstanding: 335.6 million; Market cap: $15.1 billion; TSINetwork Rating: Above Average; Dividend yield: 4.7%; www.telus.com) recently raised its quarterly dividend for the second time this year. The new annual rate of $2.10 a share, up 5.0% from $2.00, yields 4.7%. Even with the increase, Telus’s dividend payments account for just 22% of its forecast 2010 cash flow of $3 billion, or $9.35 a share, so further hikes seem likely. That strong cash flow will also let Telus keep investing in its networks and other businesses. As well, its long-term debt of $5.4 billion is a moderate 36% of its market cap...

In the past few years, Telus has invested heavily in its wireless networks. These upgrades have been costly, but they are paying off, particularly as more people use mobile devices to access the Internet. The shift to wireless has forced Telus to restructure its traditional phone business. One-time costs, including severance payments, have held back its earnings in the past two years. The company has completed most of these changes, so its earnings should start rising again. As well, its improving outlook is freeing up more cash for dividends. TELUS CORP. (Toronto symbols T $45 and T.A $43; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 320.7 million; Market cap: $14.4 billion; Price-to-sales ratio: 1.5; Dividend yield: 4.7%; TSINetwork Rating: Above Average; www.telus.com) is Canada’s second-largest telephone company after BCE Inc. (Toronto symbol BCE, see Updating BCE Inc., Royal Bank of Canada and Pengrowth Energy Trust)....

ISHARES DOW JONES CANADA SELECT DIVIDEND INDEX FUND $20.26 (Toronto symbol XDV; buy or sell through a broker; ca.ishares.com) holds 30 of the highest-yielding Canadian stocks. Its selections are based on dividend growth, yield and payout ratio. The weight of any one stock is limited to 10% of assets. The fund’s MER is 0.50%. It yields 5.3%. The fund’s top holdings are CIBC, 8.0%; Bank of Montreal, 6.4%; National Bank, 5.7%; TD Bank, 5.6%; Telus, 5.2%; Bank of Nova Scotia, 4.6%; Manitoba Telecom, 4.5%; IGM Financial, 4.2%; Royal Bank, 4.0%; Enbridge, 3.5%, TMX Group, 3.5%; and TransCanada Corp., 3.3%. The fund holds 60.1% of its assets in financial stocks. Utilities are next, at 23.0%. The top Canadian finance stocks have sound prospects. However, if you invest in this ETF, be sure to adjust the rest of your portfolio so it won’t be overly concentrated in the financial sector....