Telus Corp (T.TO)

Set of three Top Picks, THEME picks: Between now and a year from now, the Fed will support the US until the election. He thinks they will not follow Japan and buy up half the S&P 500. The Fed wants to raise interest rates. When we get past the election he thinks the Fed will become more realistic and interest rates will start heading up. C-N happens to be very, very cheap. G-T has probably been one of the poorer performing gold stocks. It is just a nice cheap income stock. Telus is a nice income stock. Things are going well for the company.

This company needs to play some catch-up. They lagged partly because of Alberta. These things work themselves out. When you get some weakness that is not a structural or balance sheet related issue, it is a buying opportunity. Have committed $2.2 billion to expand their 4G network. Dividend yield of 4.28%.

(Market Call Minute) He favours it over some of the other ones. They are going through a period where they are re-inventing themselves. He wouldn’t like them if it was just telephone.

(Market Call Minute.) This is a long-term Buy. Great company and well-managed in a good industry.

(Market Call Minute.) Great dividend. A good entry point. He likes that it is a pure mobile space, and sees that space continuing to grow. Feels the dividend is safe.

This one is across the country, but it’s biggest assets are in Western Canada. Telecom stocks have all benefited from low interest rates, because they pay high dividends. This stock is okay, just watch out for rising interest rates. He would prefer BCE (BCE-T) because Telus has a more leveraged balance sheet.

This is in a giant channel. Not a trading vehicle to him. Volumes are just ho-hum. The stock stays in a very tight range.

He is less concerned with conditions out west and more with cyclical conditions. People are unhooking from cable. They have good cash flow, buying back shares and raising dividends. There is no growth here, however.

This is a stock that normally does very well in the summer. That is good, because there aren’t many stocks that do well in the summer. The stock has been in a range in the last little while. As it moves above its current trading range, then you have upside potential.

Telus (T-T) Bell (BCE-T) or Rogers (RCI.B-T)? He owns BCE which he likes. Telus has always been a very well-run company. They are going to take apart of some of the wireless business from Manitoba Tel (MBT-T). The issue is that Alberta is very slow, and this may be a good opportunity to buy it here.

They have decent earnings growth and dividend growth. It is trading slightly below its 5 years average. They have some upcoming Shaw competition from a launch they will do. Because they have an Alberta base there is a bit of a headwind. Despite all this he thinks you could buy it.

Like a lot of utilities, pipelines and telecoms, there is not a lot of growth. All of them have done a really good job of squeezing out whatever growth there is, and now there is a little bit of fight on the phone side and cable TV. This has the most Alberta exposure, which is why it has been weak. Longer-term, this one is the best bet.

Telcos have been good at competing cooperatively, a very cozy place to be. Looks at these as free cash flow machines and how much cash they generate. Today they have some challenges. Some parts of the business have structural issues, and they have been very good at managing that. Over time, there are things that have to be monitored, in terms of competitive intensity in things like wireless. Right now it is pretty even, but we are going to have to see what happens with Shaw and Wind Mobile which can tend to be disruptive. Well-run and the dividend is safe. Wouldn’t count on much more than the 4.4% dividend at this point.

RCI.B vs. T-T. There is probably more growth potential in T-T, but there is less diversification. He prefers T-T. He expects the relative outperformance to continue.

If you are a dividend investor, this is a place to put money. This is a telco that will probably do well as oil turns around because of their Western exposure. Canadian telcos have been the beneficiary of lower oil pricing, in the sense that people wanted money out of the energy space and went into telcos. Valuations in Canadian telcos now are about a multiple turn more than in the US. If the Canadian economy improves, you might want to take some chips off the table at that time.