Over the last decade, Shaw Communications Inc. (TSX:SJR.B)(NYSE:SJR) has been a great dividend growth choice, increasing its monthly dividend from $0.02 to $0.09875 per share. Including reinvested dividends, an investor putting $10,000 to work in the company a decade ago would be sitting on shares worth approximately $24,000 today.
Things aren’t quite as good for Shaw as a decade ago. The company is dealing with cord-cutters in two parts of its business. People choosing wireless phones over landlines is a theme that has been playing out for years. Now it also has to deal with customers cutting the cable cord.
Over the last 12 months, Shaw has lost approximately 3% of its television subscribers. It has been able to weather this storm by raising prices to existing subscribers by about 5%. But as more and more people move to watching TV over the internet, some feel Shaw could really start to lose that pricing power.
It also seems likely Shaw’s history of a dividend growth darling is very close to over. The company hasn’t raised its dividend since early 2015, and it currently has a payout ratio of more than 90% of earnings. That should go down as its new wireless division Wind Mobile adds to its bottom line.
Shaw’s management made the smart move to get into wireless, where the growth is. But that also comes at the cost of having to spend aggressively to expand Wind Mobile’s network. This will likely mean lackluster dividend increases going forward, but the company shouldn’t have a problem maintaining its 4.6% yield.
