Telus Corp (T.TO)

Had a really good run but is in a sector that he feels that continues to grow their dividends and revenues. Wireless is still very popular and growing and has not fully penetrated yet. Seeing more and more data usage on smart phones, which is going to drive revenue growth for this company.

He likes that they have the IP-TV which they are doing a great job with and having great growth. Great franchise in wireless. Most important is that they are probably the most important poster child for understanding investor appetite. 3 years ago they said they would raise their dividend twice a year for the next 3 years, which they did. Have had a 5-year compound growth rate of just over 22% in their shares. About a month ago, they committed to a dividend increase over the next 3 years of 10% or greater.

Will the 2-for-1 split in mid April have a positive impact on the stock price? Stock splits don’t really matter that much. Like all the telcos, this has had a great run. Expects they will continue to do well but expects it will move more sideways than anything else. Reasonable yield and good balance sheet.

Prefers BCE (BCE-T), which is more of a pure play because it doesn’t have the broadcasting assets. He is warm towards this company but doesn’t own it. 2-for-1 stock split is coming in April, but it doesn’t mean anything so it doesn’t matter whether you buy it before or after.

Owns both Bell Canada (BCE-T) as well as this. Bell would be mainly for the larger dividend and this one for a little more growth in both the stock and the dividend. 2 for1 Stock split is coming in April and this will help as well.

Industry Canada came out today with some new rules which clearly favours new entrants and the stock took a drop. His outlook on the telecom space is not very optimistic because of this. Wouldn’t put new money into this sector. Income investors should continue to hold some of their holdings but if you own, consider taking some profits.

Valuation getting a little stretched. 3.7% yield. BCE is not a bad idea either and has their stated dividend policy.

(A Top Pick May 15/12. Up 17.31%.) Class A shares.

Hit an all-time high today. There is a lot of chasing of yields going on. Telcos are generous with dividends and they keep raising them so people keep buying these stocks. Yield of 3.7%. He questions what happens a year from now if we start to see the five-year bond going up towards 3%. This is the big risk you face with some of these stocks. He is a believer in the telecom sector simply because of data usage but a little nervous of telcos right now. Owns them but has his fingers crossed.

Very expensive to him. His model price is $52.48 versus its current price of $67.70. A negative 21%. Everyone is in love with the yield even though it is only 3.3%. A lot of opportunities elsewhere.

In his top five holdings in the firm. A poster child for what has worked. Dividends have grown over time. Payout ratio is going down. Should be a core holding. All three in this sector have what he is looking for.

Combining voting and no-voting shares will not affect the dividend. Collapsing it will be positive and will increase liquidity.

Selling Covered Call Options on Telus shares? First you have to decide what you want this to do. Stock is currently at $67 so the option series are going to be $66 and $68. If he sold the $66, he would be selling at $1 in the money, in other words just paying for his own option. If he was to go to the $68, he wouldn’t get that much. He would wait a little to see if he gets up to $67 or goes back to $66. Also, how far out you want to sell the option? He normally goes out 6 months to get better downside protection. Also, what is the ex-dividend date?

Recently touched a new all-time high. Selling slightly above its average multiple over the last number of years. Has the largest exposure to wireless. Likes its outlook. Increasing its dividend at about a 10% pace per year, which he thinks will continue for at least the next couple. Have strong pre-cash flow growth to support it.

Great stock. Growing at a faster clip than some of the other telcos. However, valuations of the telcos are at the high end of their historical range. This happens when you get into a period where investors need to be defensive and they need income and yield and they avoid cyclicals. 3.9% yield.