This Canadian telecom company’s shares were recently upgraded by Canaccord Genuity to ‘Buy.” The shares have a current annual dividend yield of 4.75%, paid quarterly.
TELUS Corporation (TU.T.TO)
From Internet Wealth Builder
TELUS Corporation is Canada’s second largest wireless telecom company after Rogers Communications Inc. Its core business includes internet and mobile phone service through the TELUS and Koodo brands. This month, it spun off TELUS International in a $1.36 billion initial public offering, the largest technology IPO in TSX history. Its TELUS Health unit is Canada’s largest telehealth provider.
The shares are up 7.4% year-to-date and are trading not far from their 52-week high of $27.74.
TELUS reported its fourth quarter and year-end results on Feb. 11. Revenue was up 5.2%, but net income was off by 30%. The results reflected multiple impacts from the pandemic, declines in landline telephone connections, and higher employee benefits. For the year, revenue rose 5.5% and earnings before interest taxes and depreciation (EBITDA) rose 0.2%. EBITDA is often used a clearer measure of performance.
TELUS is bullish on 2021, which began with the TELUS International spinoff. It was launched as a call center manager in 2007 and provides customer service for companies including Fitbit, Uber, and online gamer Zynga. It moderates their online content and builds virtual customer service assistants, often called chatbots.
Investors pushed the IPO price up 20% on its first day, where it closed at US$30.40 with a market capitalization near $10 billion. TELUS retains control through multiple-voting shares.
Discussing the earnings, CEO Darren Entwistle said the IPO’s success reinforces the strategy of building out “uniquely diversified” technology-oriented assets, which include TELUS Health and TELUS Agriculture. TELUS did not provide financial information on either. François Gratton, chair of TELUS Health, said last year the unit has $800 million of revenues.
Mr. Entwistle noted that, despite the pandemic, TELUS Health saw increased demand for its virtual care solutions in 2020. The pandemic limited visits to its health care clinics, but even so it is expanding its fleet of mobile clinics. It added seven in 2020, and two more in January, bringing the total to 13.
While Rogers and BCE turned to media investments as way to grow, TELUS is using its skills to manage data in new and very focused ways. The spinoff model is expected to be the first of several, with predictions that TELUS Health is next. TELUS Health helps doctors, dentists and clinics manage their offices. This includes the software that manages billing services, keeps records, schedules appointments, and sends reminders.
TELUS has teamed up with Babylon Health Services Ltd., a private U.K. company that is a leader in artificial intelligence and related technologies. TELUS uses Babylon’s app, which is free to download. Doctors can refer patients elsewhere or prescribe drugs using the app, which links them to a pharmacy. In most provinces, government health care plans cover the costs. Babylon’s U.K. web site claims its services are 35% cheaper than traditional consultation methods.
TELUS is growing these businesses out of the limelight and plans to retain a big stake after spinoffs. It enhances value for TELUS shareholders and offers a model for growth outside its core business.
TELUS raised its dividend 7% with the January payment to $0.31 per share.
Action now: Buy.
Adam Mayers in Gordon Pape’s Internet Wealth Builder, buildingwealth.ca, 1-888-287-8229, February 15, 2021