While the technical picture has improved dramatically in recent weeks, with T’s stock up just under 10% from its 52-week low, investors may want to err on the side of caution and make sure the rest of their income portfolio is well diversified in names with well-covered returns (think dividend yields well above 6%). Regardless, I think Telus stock is fairly valued at around $19 per share. At these depths, the stock trades for about 24.4 times its price-to-earnings (P/E) ratio.
Telus is great, but shares aren’t super cheap yet
Telus is by no means a bargain, but it’s not too expensive either, especially when you consider its high dividend yield. With a potential technical bottom pattern that could well come to fruition in the coming weeks, investors should keep a close eye on the name, especially if this is in fact the last chance to grab Telus shares with a yield well above 8.5%.
Of course, the basic principles and the price of entry are much more important than the technical background. But for investors pushing for more value and a more promising dividend growth trajectory, there are some better names on the TSX Index.
Quebecor’s yield may not be exciting, but its shares are too cheap
Whether you’re looking for diversification beyond that of a Telus, or looking for something cheaper and more growing, fellow Canadian telecom players Québecor (TSX:QBR.B) certainly stands out. Of course, there are few, if any, alternatives to Telus and that sky-high 8.8% dividend yield, at least right now. Still, I think Quebecor has a lot to offer, especially for investors looking for a bit of pair trading, as the Canadian telecom scene appears to be getting a higher bid for a change.
When it comes to Quebecor, it’s all about aggressive expansion. The company has done a great job of capturing market share with its Freedom Mobile business, which could continue to close the gap with its larger rivals over the next four to five years. When it comes to Quebecor, it’s undoubtedly all about capturing market share outside the province of Quebec. And so far, investors are happy with what the company has delivered.
The stock is up almost 57% in the past year, crushing its larger telecom peers. And while a pullback appears to be in the works, with QBR.B shares down more than 6% from their highs, I like the growth story and the potential for earnings growth to fuel even more generous dividend increases. What I like even more than the growth story is the price of admission. The stock is just 13.9 times lower on its price-to-earnings ratio.
And while the 2.81% dividend yield is certainly not exciting, I do see plenty of room for growth. So if you’re a little dissatisfied with Telus’ lull in dividend growth, nibbling on Quebecor might be a good bet, especially as the broader telecom scene sees some relief this year. In short, Telus is great for yield (and technical timeliness), while Quebecor is a fast growth, momentum and value strategy.
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