Here I am sitting in Minneapolis airport waiting to board my last flight home. The last few days has been pretty crazy. Luckily I’ve made some great progress toward all the critical issues so my customer returned my Canadian passport, let me out of the windowless room that I have been working in the past 2 days, and allowed me to go home. Kidding aside the trip has been great considering the circumstances.
Yesterday the stock market went down the drain. Most of the stocks listed on Canadian and US markets dropped significantly. For the past number of weeks I have been eying Telus as a potential purchase in the regular trading account. Yesterday’s major drop allowed me to pull the buying trigger.
As my latest recent buy, I purchased 40 shares of Telus. This is first time that we hold a dividend paying company in all three different investment accounts – regular, RRSP account, and TFSA. Moving forward my plan is to add to our Telus positions so we can enroll in synthetic DRIP in all three accounts.
Telus is one of the big three telecommunication providers here in Canada. The company has shown consistent growth over the last number of years and has continued to add new customers during the last few quarters. Although traditionally a cellular provider, Telus has established a strong customer base in both TV and high speed internet businesses. This is very different than the other two competitors, Rogers and Bell. Rogers is primarily focused in the cellular and media businesses. Although Bell shares similar profile as Telus, BCE does not have as wide customer base as Telus. I definitely like that Telus has been able to expand into the non-cellular spaces. Expanding the empire is always a good way to attract more customers and generate more revenues. Telus has paid dividend since 1999 and has increased dividend for the past 10 years. In 2011, the management declared that they will continue increasing dividend twice each year at around 10% annual rate. The management has decided to do so at least until 2016. If the company continues to do well, there’s no doubt in my mind the 10% increase will continue. The declaration by the Telus management showed the confidence they have about the company when it comes to continue generating revenue in the foreseeable future.
I quite like the telecommunication sector because I believe the sector is a money making machine. The sector is stable and will continue to grow. This is why we own Telus, Bell, Rogers, AT&T, Vodafone, and Verizon in our dividend portfolio. A lot of people already have smartphones. For those that still have non-smart phones, they will eventually have to replace their phones. When you buy a smartphone on contract, all the carriers in Canada force you to sign up on a data plan. This is a very smart way to get the customers to pay for more money than necessary. Furthermore, it is extremely rare for someone that owns a smartphone to not have a data plan. The Canadian consumers will continue to pay money for using data on their smartphones. This is easy money for a cellular provider like Telus. Furthermore, as Internet of Things begin to pick up, more and more devices will be tied to the cellular network. This will bring even more revenues to cellular providers like Telus. On TV and high speed internet side of things, Telus has been adding customers and making their services more reliable. A lot of my friends and co-workers prefer Telus over Shaw for TV and internet services simply because Telus has a higher quality of service. Although we’re currently on Shaw for internet service, I’m strongly considering switching to Telus once we move to our new house. Telus is also working on expanding into the Health Care sector. Although the details are somewhat scarce, I believe this will further differentiate Telus from Rogers and Bell.
Like any stocks, there are always risks associated in investing in a company. Investing in Telus is no different. The Canadian government has been talking about adding a 4th nationwide carrier for a number of years. While I believe a 4th nationwide carrier is unavoidable, it’s unclear when such carrier will enter Canada. It requires a lot of capitals to set up all the necessary infrastructures to support a nationwide network. In addition, the new carrier will need spectrums. Right now the big three own most of the cellular spectrums in Canada. I strongly believe that it will take at least another 5 years or more to establish a new nationwide carrier. For the average consumers, unless the new carrier offers incredible deals, it is unlikely for them to switch their cellphone provider. In other words, I believe the risk is limited.
Currently Telus pays $0.38 per share each quarter. This purchase will add $60.8 into our annual dividend income.
What do you think about my decision to purchase Telus? Do you own Telus in your dividend portfolio?