I meant to write about Telus’ dividend raise from May 7th a couple times but figured I’d compile any dividend raises into one post by the end of the month. I had a bit of time on my hands and so I decided to do a minor analysis of their dividend raise and what it meant in relation to future raises and payout ratios.
Telus (TSE: T) raised their quarterly dividend by 10.5% (compared to last year’s second quarter dividend) to $0.42 per share on May 7th. Telus’ quarterly dividend for the end of last year’s second quarter was $0.38 per share.
Dividend Raise Or Working Raise?
I only purchased shares in this company last month, while the quarterly dividend was $0.38 per share. Considering I never received a dividend from Telus prior to the coming second quarter of 2015, I don’t consider myself receiving a raise. However, anyone who’s had Telus since the second quarter of last year, can consider themselves having received a 10.5% raise from last year. That’s pretty hefty when you consider you didn’t even have to lift a finger after the transaction went through on your brokerage account! Think of how hard you’d have to work at your 9 – 5 to be asking your boss for 10.5% raises year after year like the one Telus provides us practically free of charge (after purchasing) and free of labour. Dividend growth is magical.
Dividend Growth Program
From their website, Telus describes their ideal payout ratio is “65 to 75% of prospective sustainable net earnings”. They currently have a payout ratio of 65%, which is very low in regards to their quote. Their current dividend program is aiming to achieve a roughly 10% increase year to year through 2016. After that, who knows, but if history’s any indication, they’ll definitely continue after a solid 11 years of annual dividend increases.
Telus’ first quarter earnings were $0.68 per share, beating estimates of $0.66 per share by 3.03%. Telus’ first quarter earnings for the year 2014 were $0.68 per share, meaning they’re EPS this quarter were 13.33% higher than one year ago, and still higher than the dividend increase which means they did not have to stretch at all for the increase they payed out.
Telco. Competitors: Why Telus?
I believe Telus is best poised for future growth when compared to Rogers and Bell, however all of these companies are incredible dividend growth stocks. Rogers has a 4.40% yield, but has a higher payout ratio of 73.93%, and Bell’s juicy 4.77% yield equates to a ridiculous payout ratio of 95.22%, which caused me to not even consider it. Anything with a payout ratio of above 80% is too much at risk for a dividend cut for me to considering putting my money in as I’ve described in my stock picking strategy. when you take the time to look around and remain patient, there are almost always better opportunities elsewhere; Telus in this case. Though I did had a bit of trouble picking between Rogers and Telus; I believe made the best choice. I also liked the fact that Telus’ wireless earnings are pretty much where all their revenue come from, as opposed to Bell and Rogers relying on other sources such as media and cable business as well; I do believe their market shares in these areas will face immense difficulties when coming up against platforms like Nexus, Crave TV, and Crunchyroll etc. Telus is a company that I can put into my portfolio and not have to worry about for years other than the check up every once a quarter or two.
The Market is Fickle, Emotions Are Unnecessary
Shortly after they raised their dividend, the stock price fell for no great reason – as is the market’s way. I lost a couple percentage points on the stock, and while it was uncomfortable at first since I had just recently started investing – I’ve now come to the realization that it does not matter at all in the short term, and find I’ve become a lot happier; check my stock portfolio a lot less, and am more confident in all my choices.
Now a month later, I’ve barely lost anything and the dividend coming my way in two months will be a pretty $14.7 for my 35 shares. I’m sure by then the price will have appreciated as well. In a year or five the slight fear and discomfort I felt last month will be a blip in my investing career. This is something I plan to write about too once I get a chance, how fearing the market and attempting to time it is just about useless. Time in the market is better than timing the market.
If Telus keeps up with their recent earnings and dividend growth (of which I’m sure they will!), they will hold a core holding in my portfolio for years, and years, and years to come.