Telus is investing in non-telecom businesses and while they have a lot of potential, they are unproven yet, says an analyst.Fred Lum/the Globe and Mail
Sign up for the Globe Advisor weekly newsletter for professional financial advisors on our newsletter sign-up page. Get exclusive investment industry news and insights, the week’s top headlines, and what you and your clients need to know.
Canada’s Big Three telecommunications companies have plenty of appeal as investors look for safety in a challenging environment.
Rogers Communication Inc. RCI-B-T, BCE Inc. BCE-T and Telus Corp. T-T are all recession-resistant, though not recession-proof, with high demand for their utility-like services. Customers need cellphone plans, internet connections and access to streaming services in all seasons.
BCE and Telus pay high dividends, which are rising on a regular basis. And while all three compete with each other, high barriers to entry mean it’s tough for new players to get a foothold.
To these strengths, the companies can now add Canada’s ambitious plan to bring in 500,000 immigrants a year by 2025. It is a powerful energizer that will deliver new customers.
“What is the first thing that newcomers want when they arrive?” asks Daniel Sacke, portfolio manager and senior investment advisor with The Sacke Wealth Advisory Group at BMO Nesbitt Burns Inc. in Toronto. “Internet and a cell phone.”
Mr. Sacke holds Telus and BCE in client portfolios, favouring Telus for its entrepreneurial bent, higher growth rate than BCE and commitment to dividend increases. Telus announced a 7.2 per cent year-over-year dividend increase in November, its 23rd increase since it started a multi-year dividend growth program in 2011.
Mr. Sacke believes if the economy slips into recession, telecom companies have the added appeal of offering inexpensive forms of entertainment such as streaming movies, TV programs, and gaming.
“We look at these companies as a defensive investment, as staples really,” he says. “You can argue that when times get tough, people are even more dependent on their phones and internet connections.”
Matthew Dolgin, equity analyst with Morningstar Research Services LLC in Chicago, also believes these companies are solid and recession-resistant businesses.
Mr. Dolgin favours BCE over Telus because BCE is a purer telecom play. Telus is investing in non-telecom businesses and while they have a lot of potential, they’re still unproven, Mr. Dolgin says.
These businesses include Telus International Inc. TIXT-T, which was spun off in 2021. It helps companies including Fitbit and Uber Technologies Inc. moderate online content via things such as customer service chatbots. Telus Agriculture & Consumer Goods and Telus Health are both expected to go the same route.
“There’s a little bit of faith that [Telus} can use its [artificial intelligence] and telecom base to help propel these other businesses,” he says. “It’s invested a lot in them and need them to succeed for their valuations to be worthwhile.”
Mr. Dolgin also sees Canada’s immigration targets as an energizer. Telus added 150,000 new customers in its latest quarter. It was the best performance since the third quarter of 2010. BCE’s net mobile subscriber additions were also a quarterly record.
In his earnings conference call, Rogers chief executive officer Tony Staffieri named immigration as one of three areas of mobile strength. The others were people returning to the office post-pandemic and resuming travel. In his call, BCE CEO Mirko Bibic also pointed to immigration.
Other influences on performance include higher roaming revenue as people resume travel for business and pleasure. More customers are buying 5G-enabled phones, which tends to lead to higher average spending.
Mr. Bibic pointed to the payoff from capital investment upgrades that are enabling 5G networks. Only 35 per cent of subscribers have 5G devices, he said, “so there’s a lot of room for growth.”
Mr. Dolgin favours Rogers as the most undervalued stock of the three in part because of the various dramas over the past year that have made headlines. These include the boardroom fight for control of the company, the network outage in July and the ongoing takeover battle for Shaw Communications Inc. While these factors don’t affect operating performance, they have depressed Rogers’ share price and this offers an opportunity for investment, he says.
Mr. Sacke considers Bell and Telus as portfolio anchors paying high dividends while offering steady growth. Mr. Dolgin sees potential for a 10- to 15-per-cent increase in their share price in the coming year.
Mr. Sacke says in a high-interest rate environment, their dividends have a lot of appeal when compared to fixed-income options. The dividend tax credit means an Ontario resident in the highest tax bracket will pay 39 per cent on dividend income versus 53.5 per cent on interest earned from a fixed-income investment.
“They give you a nice mix of dividend income and growth and that’s what you want in this environment,” he says.
In the end, it comes down to a preference.
“Each of these companies are great,” Mr. Dolgin says. “And whenever the market presents an opportunity for any of them, they’re worthy buys.”
Adam Mayers is a contributing editor to the Internet Wealth Builder investment newsletter.
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
