Telus is a safe play during market volatility, this fund manager says

Like the rest of the market, Telus (Telus Stock Quote, Chart TSX:T) has had an up-and-down year, but with an attractive dividend — not to mention its membership in Canada’s telecom oligopoly — investors worried about market volatility should feel safe about putting their money in Telus, says Douglas Kee of Leon Frazer & Associates Investment Counsel.

“We own it and have owned it for quite a while,” says Kee, managing director and chief investment officer at Leon Frazer & Associates, to BNN Bloomberg. “There’s lots of competition, but as long as the wireless market is growing the competition isn’t that severe that it’s hurting any of those telecom guys right now. It’s in a business that’s a quasi-oligopoly with barriers to entry in Canada.”

Like BCE and Rogers, Telus has posted strong gains in new wireless customers in recent quarters. Telus’ third quarter, delivered on November 8, boasted a profit of $447 million, up from $406 million a year earlier, and operating revenue of $3.77 billion, up from $3.40 billion in the previous year. Telus reported a net gain of 145,000 wireless customers in its Q3, along with 36,000 high-speed internet subscribers and 18,000 Telus TV customers.

Management said with its Q3 report that its capital investments —predominantly, the company’s replacing of its wireline network from copper to Fibre-To-The-Home (FTTH)— are now seeing a payoff in its subscriber and loyalty results.

“The efficacy of our broadband technology investments is reflected in Telus, once again, being named as having the fastest mobile network in Canada by PCMag,” said President and CEO Darren Entwistle. “This repeat acknowledgement builds on our outstanding record of achievement with respect to network excellence, having already earned the top spot in all major mobile network reporting this year.”

Kee says that while investors fled the telco’s earlier in the year due to the higher interest rate environment, they’re now being pulled back due to volatility in the markets.

“[Telus] has increased their dividend by roughly seven or eight per cent each year with a decent yield on it of four per cent or so,” says Kee. “At the beginning of the year, the utilities got creamed because interest rates were going up. The telecoms got hurt but not as badly. More recently, the telecom companies have held in pretty well and the utilities have come back.”

Telus’ share price hit a 12-month low of $43.88 on October 12 but has since climbed 4.8 per cent to $46.07 where it sits as of midday trading on Wednesday. The stock is now down 2.8 per cent for the year.