TELUS (TU): Dialing Northward for Quality Returns

The wireless phone business is the largest division at TELUS, and it is performing well. The company has upgraded its wireless network, and its advanced 4G/LTE network now reaches two-thirds of all Canadians. In addition to its high-quality phone network, TELUS has emphasized quality service.  Its customer service efforts resulted in the loss of less than 1% of its wireless customers in the most recent quarter, an extraordinarily low level in the industry.

 

TELUS management has done a good job of coping with heavy competition for wireless phone service, high-speed Internet, and TV services, while absorbing the loss of legacy landline phone customers.  Its return on invested capital was 12% in 2012, well above average for North American telecom peers. Top management is putting its money alongside public shareholders. CEO Darren Entwistle has run TELUS since 2000, and for the fourth consecutive year he is taking his cash salary in company shares.

TELUS appears to be entering a period of accelerating cash generation that should support above-average dividend and earnings growth. Wireless phone ownership in Canada has room for expansion, and growth in data usage should enhance earnings growth. TELUS is a high-quality North American telecom stock that can be considered a core holding for income, income growth, and moderate capital appreciation.

Sustainability Profile

TELUS has a strong sustainability profile. It conducts its business in alignment with universally accepted principles of human rights, labor, the environment, and anti-corruption practices, guided by the United Nations Global Compact. Its customer service has been recognized for excellence by J.D. Power. The company’s emphasis on balancing work and home life has helped it to be widely recognized as a good place to work. Employee satisfaction is in the top 1% globally of companies its size, and it is one of Canada’s top diversity employers for the fifth straight year. In the area of environmental sustainability, TELUS has been recognized as one of the “greenest” employers in Canada. It has ambitious targets for reducing waste, energy consumption, and greenhouse gas production. Its major building projects recently have been designed to LEED standards. In sum, we like this respectable corporate citizen as an attractive total-return holding.

Telus (TU)

Revenues: $11.3 billion

Earnings Per Share (EPS):

2014E      $2.34
2013E      $2.06
2012A      $2.02

Projected Annual EPS Growth Rate:  10%
Dividend:   3.9%
52-week Low-High:  $28.15-$37.48
Risk:   Low

Website:  www.telus.com