Saturday, 15 June 2013

A Look at Telus


I recently purchased 100 shares of Telus (T.TSX) @ $34.10 including commission. Below is my analysis.

Average Dividend Yield Analysis*

T.TSX
Year
High Price
Low Price
1Q
div.
2Q
div.
3Q
div.
4Q
div.
Annual Dividend
High Yield
Low Yield
2002
$12.26
$2.88
$0.075
$0.075
$0.075
$0.075
$0.30
10.42%
2.45%
2003
$13.43
$7.63
$0.075
$0.075
$0.075
$0.075
$0.30
3.93%
2.23%
2004
$18.70
$10.41
$0.075
$0.075
$0.075
$0.075
$0.30
2.88%
1.60%
2005
$25.00
$17.57
$0.10
$0.10
$0.10
$0.10
$0.40
2.28%
1.60%
2006
$32.80
$21.31
$0.1375
$0.1375
$0.1375
$0.1375
$0.55
2.58%
1.68%
2007
$33.23
$20.99
$0.1875
$0.1875
$0.1875
$0.1875
$0.75
3.57%
2.26%
2008
$24.95
$16.14
$0.225
$0.225
$0.225
$0.225
$0.90
5.58%
3.61%
2009
$18.75
$14.56
$0.2375
$0.2375
$0.2375
$0.2375
$0.95
6.52%
5.07%
2010
$24.00
$16.02
$0.2375
$0.2375
$0.25
$0.25
$0.98
6.09%
4.06%
2011
$28.87
$22.49
$0.2625
$0.2625
$0.275
$0.275
$1.08
4.78%
3.72%
2012
$32.98
$27.60
$0.29
$0.29
$0.305
$0.305
$1.19
4.31%
3.61%
2013


$0.32
$0.32
$0.34
$0.34
$1.32


2014


$0.34
$0.34
$0.34
$0.34
$1.36


Stock prices are per calendar year.
11y ave
4.81%
2.90%
Dividends are recorded in the quarter they were paid.
5y ave
5.46%
4.01%







3y ave
5.06%
3.80%







5y
$24.93
$33.88







3y
$26.88
$35.81






Super Cheap
$20.84



The table shows the 3 year average dividend yield to be 5.06% ((6.09% + 4.78% + 4.31%)/3). I use the numbers in the “High Yield” column for obvious reasons.

Using the current annual dividend of $1.36, one would have to pay $26.88 for a 5.06% dividend yield.

Buying the stock at its low in 2009 would have earned you an initial yield of 6.52%. Using the current annual dividend, that corresponds to a stock price of $20.84 today (see “super cheap” price in the table above).

Graham Price

T’s 2010, 2011 and 2012 EPS were $1.62, $1.87 and $2.03. 3Y Ave EPS = $1.84.
T’s BV is $11.78.
Graham Price = SQRT (3Y Ave EPS * BV * 22.5) = $22.06

Cyclically Adjusted Price to Earnings Ratio

T’s 10Y Ave EPS = $1.46
CAPE = Stock Price / 10Y Ave EPS = $69.98 / $3.05 = 23.8
A CAPE below 20 is good.

Conclusion

As the numbers show, Telus is expensive. So you’re probably wondering why I bought some shares. It comes down to excellent management, great customer service, a fantastic dividend growth policy, a current yield of roughly 4% and too much cash sitting in my brokerage accounts. If Telus does get cheaper, I will add to my current position. If it goes above $40, I will consider selling and purchasing a better-valued stock.

T increased EPS from $0.46 in 2003 to $2.03 in 2012. That’s an increase of 4.4 times over 9 years. 2013 and 2014 EPS are estimated at $2.10 and $2.33, respectively.


*My method is not perfect as the stocks low price may have occurred before the annual dividend increase.

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