I calculated my own target prices and came up with $22. To see the details of this calculation, read the full analysis of TELUS.
Other investment options in the same industry
TELUS shares the industry with Rogers Communications Inc. (USA) (NYSE:RCI) , Shaw Communications Inc (USA) (NYSE:SJR), and BCE Inc. (USA) (NYSE:BCE). Because of the recent news that Verizon Communications may be entering the industry, I included it in the chart as well.
Information in the tables above and below for TELUS, Rogers Communications, Shaw Communications and BCE is from the Toronto Stock Exchange, not NYSE.
Rogers Communications has the lowest payout ratio and a decent estimated EPS growth rate of 6.3%, which should translate into good dividend growth. Its past dividend growth rates have been good with all of them being above 10%, including the most recent increase. No dividends were paid in 2002, so the 10-year dividend growth rate couldn’t be calculated. The nine-year average annual dividend growth rate is an impressive 46.8% though. With potential for new competition from Verizon, I’m comforted by their low payout ratio compared to the others.
BCE Inc. (USA) (NYSE:BCE) offers the highest yield, but has low dividend growth prospects. BCE’s payout ratio is fairly high at 67.93%. This does not allow for much dividend growth beyond its EPS growth rate. Currently, analysts expect EPS to grow 4.5% annually for the next five years, which suggests limited future dividend growth. My guess is that it will be around 4% or 5% annually. BCE has the lowest dividend streak, and the limited dividend growth potential will keep me on the sidelines for now. BCE doesn’t have as much of its income coming from wireless sources, so the Verizon entry wouldn’t affect it as much as Rogers Communications or TELUS.
Shaw Communications Inc (USA) (NYSE:SJR) has a good dividend streak, a reasonable payout ratio, and a decent estimated EPS growth rate of 6%, but the recent dividend increases have been around 5%. This is 3% lower than the 8% I like to target. The company recently stated that they plan to target dividend increases of 5% to 10% over the next two years due to an improvement in free cash flow. It is hard to say if dividend growth will meet my 8% target, which is why I prefer TELUS and Rogers Communications. Shaw Communications doesn’t have any of its income coming from wireless sources, so the Verizon entry shouldn’t affect it.
Verizon Communications has a good dividend streak of eight years, but its dividend growth is not very impressive as it has generally been around 3% or 4%. Its payout ratio is really high when compared to the EPS from the last twelve months. I looked into this a bit further and analysts expect EPS for 2013 to be $2.80, which would result in a more reasonable, but still high payout ratio of 73.57%. The annual estimated EPS growth rate of 10.5% is good, but because of its high payout ratio, I think dividend growth will be lower than EPS growth. I don’t plan on investing in Verizon Communications.
