The Big 3 Canadian telecoms, such as BCE Inc. (TSX:BCE)(NYSE:BCE), pay dividend yields of 4-5% with sustainable payout ratios. How do the telecoms differentiate from one another? Which telecom is best-valued? What about dividend growth prospects?
The telecoms, including Rogers Communications Inc. (TSX:RCI.B)(NYSE:RCI), and Telus Corporation (TSX:T)(NYSE:TU) generate stable cash flows from their operations. So, they’re great dividend investments.
BCE has increased its dividend for 7 consecutive years at a CAGR of 8.1%. It just increased its dividend in the first quarter by 5% to an annual payout of C$2.73 per share. BCE targets its free cash flow (FCF) payout ratio to be 65-75%. BCE’s free cash flow generation forecast for 2016 implies its payout ratio would be 70-76%.
Rogers has increased its dividend for 11 consecutive years. In the past 5 years, Rogers increased it at a CAGR of 8.4%. Based on its usual schedule, it was supposed to increase its dividend in the first quarter, but it has only maintained its quarterly dividend at C$0.48 per share.
Telus has increased its dividend for 12 consecutive years. In the past 5 years, Telus increased it at a CAGR of 10.9%. Based on its usual schedule, it should increase its dividend in the second quarter. This year, it plans to increase its dividend by about 10%.
Telus targets a payout ratio of 65-75%. Its quarterly payout of C$0.44 per share implies its payout ratio is about 71% based on its earnings estimates.
All 3 companies have sustainable yields. However, BCE and Rogers earn about 12-15% of revenue from their media business segment, which makes their revenue streams more diversified than Telus’.
Telus generates all its revenue from wireless and wireline businesses. On the other hand, Telus is the best-valued telecom, and it has consensus analyst EPS growth of about 6.8%.
At around C$39, Telus is priced at about 15 times its earnings, while both BCE and Rogers’ are priced at above 17 times their earnings at around C$59 and C$49, respectively.
This is a concise excerpt from this Seeking Alpha article: Which Big Canadian Telecom Should You Consider For Dividends?
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