TELUS (TSX:T)(NYSE:TU) isn’t the cheapest dividend stock out there. However, this suggests that it’s relatively resilient, defensive, and predictable.
Why might investors invest in TELUS stock? It could fit the portfolios of income investors seeking passive income, for example.
I said I was buying TELUS and four other dividend stocks during this market correction. Here are three big reasons why I pulled the trigger on TELUS shares last week.
Track record of dividend growth
TELUS stock has paid an increasing dividend every year since 2004. That’s a pretty long track record among the Canadian Dividend Aristocrats. TELUS ranks as one of the top 20 Canadian Dividend Aristocrats in terms of dividend-growth streak. This track record is a confidence booster for prospective investors.
Nice dividend yield
The dividend stock yields about 4.7%, which is considered a high dividend yield. It is 1.6 times that of the Canadian stock market yield. This is why I mentioned earlier that income investors may be interested after the TSX stock dipped about 17% from its 52-week high.
TELUS stock’s trailing-12-month (“TTM”) dividend payout ratio was sustainable at 63.6% of earnings. For reference, its TTM dividend per share is 6.2% higher versus the prior 12-month period, and its three-year dividend growth rate is 6.6%.
The company tends to increase its quarterly dividend twice a year. We expect another ~3% dividend increase in November.
TELUS stock’s valuation is reasonable
Looking at the consensus analyst estimates reduce analyst bias risk.
Although TELUS’s net margin is at the low end of the spectrum compared to other profitable peers, analysts estimate that the company could deliver industry-leading growth with a earnings-per-share growth rate of 15.4% over the next three to five years. The stock, therefore, trades at a reasonable valuation with a forward P/E of 22.9 and a PEG ratio of about 1.6.
In terms of the analyst consensus 12-month price target, it’s $34, which implies 17.5% near-term upside potential. We understand that analysts’ price targets are subject to change but the telecom’s results are usually fairly predictable. The narrow target range of $32-36 implies a fairly predictable business indeed.
Which is your favourite Canadian telecom stock? Tell us why below.
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Disclosure: As of writing, we own TELUS.
Disclaimer: I am not a certified financial advisor. This article is for educational purposes, so consult a financial advisor and or tax professional if necessary before making any investment decisions.
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