There’s incredible value, and then there’s decent value. Right now, I’d put Telus Corporation (TSX:T)(NYSE:TU) in the latter category. This is a company with tremendous secular tailwinds provided by the 5G transition right now. Additionally, this is a company with bond-like dividend returns that many investors may be itching for right now.
Fundamentally, this stock is trading at a valuation multiple that I think is fairly priced. I don’t think this is a cheap stock by any means, but I do think the 25-times earnings multiple is justified right now. Telus is one of the largest players in the telecommunications sector in Canada, a market which is a well-known monopoly and one that has some of the highest margins in the developed world for its telecom companies.
Telus’ dividend is another key reason investors continue to provide support for this stock at these levels. The company’s 4.7% dividend yield is widely considered to be one of the safest on the TSX, and has granted the company a premium multiple to some of its peers for some time.
I think this is likely to continue long-term, particularly if investors rotate their money away from growth stocks into more defensive sectors in the coming years, as I think they will. Valuations across the board are approaching ridiculous levels, and I think investors will be looking for companies like Telus with real cash flow growth and long-term secular trends as safer alternatives in a correction type scenario.
Invest wisely, my friends.
