March 23, 2023

Why am I adding more Telus and BCE to my dividend portfolio

I have accumulated almost $1,700 in cash in my model portfolio. Now is the time to put some of the money to work.

If you’re lazy like me, the great thing about dividend investing is that it’s largely a passive exercise. When you buy shares, dividends are calculated every quarter – or in some cases every month. You don’t have to lift a finger.

However, to take advantage of the magic of compounding, you’ll need to get off the couch every once in a while to reinvest your dividends. True, you can enroll your shares in a dividend reinvestment plan to make the process automatic, but I prefer to reinvest my cash manually so I can take advantage of stocks that are attractively priced.

This brings us to today’s topic.

Shares of the two telecommunications companies in my portfolio — Telus Corp. ( TT ) and BCE Inc. ( BCE-T ) — have both suffered double-digit percentage losses from their peaks last spring as rising interest rates, inflation and recession fears have faltered. dividend stocks in general and telecommunications in particular.

That’s bad news. The good news is that their yields – which move in the opposite direction to stock prices – are now even more attractive. Also, since both stocks already reflect a difficult financial backdrop, I suspect that the short-term downside from this could be limited. In the longer term, both companies will benefit from the introduction of 5G wireless technology and the growing adoption of fiber optic internet.

For these reasons and others that I will discuss shortly, I have decided to buy another 25 shares of Telus and 15 shares of BC. B.C. shares in the model-specific Yield Hog Dividend Growth portfolio. (These purchases were made at Monday’s closing price for a total of $1,638.25.)

The money in the model portfolio is not real, but – full disclosure – I also own both stocks personally. I am also a customer of both companies; My family has four cell phones with Telus subsidiary Koodo, and we get high speed internet from Bell.

Fortunately, our cell phone and internet bills are going up – along with everything else these days – and my dividends from Telus and BCE are also steadily increasing. If I’m going to send them a wad of cash every month, I might as well get something in return.

Just this month, Telus raised its fee for the second time this year as it reported strong subscriber, revenue and profit growth in the third quarter. This continued a semi-annual dividend hike that stretches back over a decade (with a brief hiatus in 2020 due to the pandemic). Telus currently yields around 4.8 percent and aims to continue increasing its dividend at an annual rate of 7-10 percent until the end of 2025.

Telus should have plenty of cash to pay off its loans. RBC Dominion Securities analyst Drew McReynolds said in a recent note that the company expects free cash flow to roughly double to an estimated $2.6 billion in 2023. This reflects, in part, lower capital spending with the fiber rollout. the home is expected to reach up to 90 percent of Telus’ targeted footprint by the end of 2022.

“Telus remains our best idea in Canadian telecommunications,” McReynolds said. He also cited the steady growth in EBITDA (earnings before interest, taxes, depreciation and amortization) of Telus Health and Telus Agriculture & Consumer Goods subsidiaries, as well as the company’s ability to reduce the debt gap on its balance sheet.

BCE is also no slouch in dividend growth. In February, the company announced its 14th consecutive annual dividend increase of at least 5 percent. Although BCE’s dividend grows more slowly than Telus’s, BCE’s yield is higher, around 5.9 percent.

BCE is also having a strong third quarter, adding more than 400,000 new wireless and wireline subscribers, including more than 95,000 new fiber to the home customers – up 33 percent year-over-year and its strongest fiber connections. up to this point.

“We see continued growth as BCE increases its share in newly fiberized areas and the company continues to drive 5G mobile penetration and move to higher-value plans,” CIBC World Markets analyst Stephanie Price said in a release. customers.

I can’t say where the share prices of Telus or BCE are headed in the short term. But I’m confident that both companies will continue to reward shareholders with rising dividends, and that over the long term their share prices will likely follow.

#adding #Telus #BCE #dividend #portfolio

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