Hope life has been treating you well and you’re continuing to stay healthy. A lot is happening in the world and news is changing daily. The market climbs on optimism, but the reality is things aren’t looking too hot at the moment.
Personally, I have been watching this market and just thinking what in the actual F&**.
With time, things will be back to a new normal, but I think in the next two quarters, we will be seeing a lot of negative earnings. This should create some more fantastic opportunities. At the same time though, certain companies and sectors continue to pile in the money.
Should I just sit here and stack cash and hope things go to sh**, so I can buy at a better price? I dunno; that’s not really my style. Although I am going to cap our investment to around $1,000-1,200 plus that $250 for the XAW ETF a month. All money above that will be sitting in the investment account waiting for an even better time to deploy it.
One that I believe will do really well is telcos. Lots of people are in lockdown and are sitting on their phones, streaming all the time. Playing poker online, talking to friends with Houseparty, Zoom, FaceTime, etc. Of course, you try to get outside as much as you can, but here it’s actually been snowing off and on and cold. I’m not outside as much as I was last week.
Imagine a lockdown without your phones or internet. People would be going absolutely crazy.
Recently Telus (NYSE:TU) did a 2-for-1 stock split in an effort to encourage more investment. This does nothing to the financials, but appears cheaper at first glance to potential investors. The lower stock price is great for people who aren’t deploying that much cash, as you feel like you get more shares. I think this was a great move and should help improve that stock price moving forward.
An added bonus is that drip is now easier to get. As you already know, I’m a huge fan of drips! I currently receive about 55 quarterly from Telus which drips two shares, but now because of the split, I can deploy a little more capital and hopefully get three drips a quarter. Compounding at its finest!
Out of Canada’s big 3 telcos (Telus, BCE (NYSE:BCE) and Rogers (NYSE:RCI)), Telus has the highest dividend growth rate. It plans to increase it by 7-10% a year until 2022. Of course in this environment nothing is guaranteed. Telus has raised its dividend the last 16 years and has a 10-year dividend growth rate of 9%.
There could be benefits from Covid-19 for Telus though. It also has Telus Health, a way to use technology to improve the entire healthcare system. I can talk a little about it, but I think you would be better off checking out its website here to learn more about this.
I guess the elephant in the room regarding all telcos is 5G. There is a lot of debate on this. I’m not a healthcare guy or anything, but a lot of people say the move to 5G will have massive health effects. If there is that much risk, do we really need it? I don’t think so, but I think it’s coming anyways. This will be extremely capital intensive, so dividend growth may be lower.
One of my biggest concerns is that fact that Telus has decided to use Huawei Technologies Co gear for 5G. While this is the cheaper way to go. Huawei has been a hot topic in the tech world. Will governments, corporations and people in general switch to the other providers that decided against using Huawei?
Time will tell…
We added an additional 50 shares of Telus this week at $22.39 per share. While it’s not the 52-week low, it’s also 20-25% cheaper than the 52-week high. I feel good adding at these levels. This purchase adds $58.26 in forward income to our dividend portfolio and hopefully enables that third drip each quarter.
In total, we now have 248 shares of Telus in the portfolio. In these uncertain times, I feel the telcos offer a great deal of safety and rising dividends for years to come. The market still offers up quite a bit of deals, but it’s crazy to see certain stocks hitting 52-week highs. 2020 will certainly be a bumpy ride. Are there any stocks you have been purchasing or watching? Or just topping up that cash?
As always do your own research, stay healthy, smile and try to enjoy these moments with your family.
Editor’s Note: The summary bullets for this article were chosen by Seeking Alpha editors.