Another Reason to Buy Canada
Investors may see a number of stocks rise in price over the next week and half, Cramer said Wednesday, but they shouldn’t be taken in by the moves.
Money managers will be doing their typical end-of-quarter markups, or buying their own favorite stocks to boost their performance. Once the calendar turns to July, though, the same tough market we saw in June will show its face again.
The smart play then is to stick with dividend plays that offer yield protection. But not just any dividend payer. Cramer thinks investors also should look for those with growth. Stocks like Telus , a Canadian telecom that yields 5%.
But where’s the growth? Well, Canadian telco stocks have been on fire, Cramer said, with Telus near its 52-week high. And that’s because not only is Canada a haven in an otherwise volatile world market, but also the country’s wireless penetration is one of the lowest in the Western world. With just 68% penetration – about where the US was in 2006 – there’s a lot of room left to grow, as estimates put the number at 95% by 2015. Plus, at an increase of 37%, Canada had some of the highest mobile data revenue growth in the developed world last year.
“The Canadian wireless business has an enormous amount of growth still ahead,” Cramer said, “and I think Telus is the best way to play that growth, while having the security of a juicy yield for protection.”
Telus is the second-largest incumbent telco in Canada, in addition to being one of the three largest wireless companies, with about a 28% share of the market. And the wireless business, which makes up 50% of revenues, is doing well: In the most recent quarter, wireless subscribers were up 6.3% year-over-year, while the even more valuable smartphone users jumped 15%.
It’s true that Telus’ average revenue per subscriber unit – a key industry metric – was down 4.4% for the quarter, but that’s not as bad as the 7.7% decline from the fourth quarter of 2009. And ARPU for data climbed 17%, a strong showing for a piece of the business that Cramer thinks should get “much larger” thanks to the growth in the mobile Web.
In regards to the wire-line business, Telus isn’t suffering the problems that have hurt AT&T and Verizon . These two are spending big bucks to maintain and upgrade their networks, but not Telus. This company is spending less on infrastructure this year because its 3G network is already built out. Cramer thinks the savings could translate into a bigger dividend in the future.
In fact, this company all but guaranteed a large payout is on its way, as Telus increased its target dividend payout ratio from a range of 45% to 55% of its earnings to up to 55% o 65%. As Cramer likes to say, any company that can afford to return more profits to shareholders is also one that’s doing better than you might expect.
So for good growth and a safe yield, consider Canada’s Telus.
It’s “one that will also give your portfolio some much-needed international diversification,” Cramer said.
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