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Growth & Income

Telus Corp (TU - Analyst Report) has a dividend yield hovering around 5% and is trading nears its 52-week high. It recently became a Zacks #1 Rank (strong buy) stock.

Telus is the second largest telecommunications company in Canada. It is based in Vancouver, British Columbia and has a market cap of $12.8 billion.

Second Quarter Results

Telus reported second quarter earnings per share of $0.92, 19% higher than in the same quarter of 2009. Total operating revenues were essentially flat year-over-year. The wireline segment saw revenues drop 3% while the wireless segment grew revenues by 6%.

Operating income improved 14% over the same period. Much of the income growth came from lower restructuring and depreciation expenses - not exactly things to get excited over but an improvement nonetheless.

Raising Its Dividend

Telus raised its quarterly dividend recently to $0.50, up from $0.475. Telus currently has a dividend yield of 5.0% and a dividend payout ratio around 60%. As you can see below, the payout ratio has been trending up in the last few years:

TU: Telus Corp

Telus produces strong cash flow and has decided to distribute much of that cash to its shareholders rather than plowing it back into the business. According to its most recent quarterly report, the company's target payout ratio is 55% to 65% of earnings. This ratio is typical given the slow-growth nature of the industry.

Outlook

Management gave guidance for 2010 of $2.90 to $3.30 per share. The Zacks Consensus Estimate for 2010 is within this range at $3.20, a 21% increase from 2009 earnings. Analysts are also expecting 6% EPS growth in 2011.

Fundamentals

Telus trades at just 0.8x book value, a discount to the industry average of 1.7. It also trades an attractive 0.6x sales and 12.6x 2010 earnings.

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