Rogers Communications (B) (RCI.B.TO)

This year, money has rotated from telcos to cable companies like this one. Inferior network, both wireless and wired. Telcos' capex winding down, cable companies now need to spend to upgrade. Fairly valued today, telecoms are much cheaper and probably due for some sort of mean reversion. Be cautious, but if you already own there's no reason to part with it.

Sports team has added value, but still has to buy out (using debt) the remaining minority stake. Then what? Family may want to still retain control. May not be as big a monetization as people are hoping -- an uncertain catalyst.

Whole sector struggles on its growth outlook. He chose this one because, at 10x PE, it has the lowest valuation of the peer group. Massive hidden value with sports assets. Pretty robust dividend.

The worries over telcos have passed, with worries over Quebecor, the fourth player, entering, and in lower immigration to buy phone plans. Rogers is his favourite, though doesn't pay the biggest dividend, but is undervalued due to the sports assets. He liked the Shaw deal.

Huge run since April. Pricing has gotten better for the incumbent telcos. Cost management pretty good. Doesn't overpay for the dividend. Sees lots of growth and upside over next couple of years.

Has had a strong move after languishing along with other telcos. Telcos are boring and defensive, lower beta. So they'll weather the upcoming corrective storm of 1-3 months. 

It's time to step back into telcos. Dividends are sustainable. He owns all 3 Canadian telcos. Share prices have bottomed, and he expects margin improvement. Costs have been slashed. Is partially optimistic, because shares have been so beaten down, and yet the industry isn't going anywhere. There will be some growth going forward. Is bullish on telcos. BCE's strategy in the US (buying a US company) will generate reasonable value. Telus is the faster grower and has made good moves outside telecoms to create value. Rogers is more of a question mark, including their sports holding, but is worth a ton of money (the value of sports teams is huge).

Likes companies that are in multiple business segments, and this one has diversified. In his dividend model with its nice dividend. Incorporating more AI, which will provide a leg up going forward.

Sector has underperformed dramatically last couple of years. Immigration changes have slowed growth, more competition with Quebecor. Starting to see pressure mitigate a bit. Shaw added massive debt. Cashflow growth starting to improve, and FCF starting to increase. Paying down debt. Starting to monetize assets. Low valuation. Sports franchises are underappreciated. Yield is 4.21%.

All telcos have been facing highly competitive pricing environment, slowing immigration targets, and lots of infrastructure capex. Better payout ratio, as it didn't raise dividends as much as others. So the dividend is safe. Debt issue from MLSE deal; sports assets are valuable, but not necessarily cashflow positive.

Maybe tide is turning on competitive intensity in telecom sector, but not overwhelmingly obvious that's so. MLSE provides interesting optionality; hard to value sports franchises, but they are rather like collectibles such as race horses or art. In the meantime, he's taking the more conservative approach and focusing on dividend growth.

His preference is Telus.

Whole telecom space has been challenged, partly because of increased competition. No outlets to grow outside Canada. Profitability will be flat for some time. People own these names for the income. Rogers' purchase of Shaw gives it an edge on cost-cutting. Telus is the best operator. Rogers has the lowest dividend yield of the group.

Steer clear of the space. Even with an income stock you do want some growth, as it helps offset valuation risk elsewhere in the business.

He still likes it and would buy more. High immigration is a tailwind since there are more customers for telecom. Cost cutting is going on and new technology is being implemented. There is lots of free cash flow and along with lower interest rates this will help to pay down debt. It has a decent and sustainable dividend.

Balance sheets have been a struggle for all the telcos; got caught when rates went up after spending so much. Less population growth was unexpected. Competition more intense. Dirt cheap at 7x PE for 2026, but no growth until then. There is MLSE upside.

All stocks stumble at times, and you want to buy them when they're cheap. Probably the darkness before the dawn for this name.

No issue with defaulting on bonds from any of the big 3 telcos. For the equity side: not a lot of growth, price competition, CRTC always making new rules.