Q: I usually look at EPS, company debt, payout ratio and their # of common stocks while reviewing a company financials.
How would you justify Telus's 135% payout ratio ?
Company earned 1.22 (2021) and 1.15 (2022) and paid dividend of 1.27 (2021) and 1.36 (2022)
Long term debt is increasing and they have almost doubled their common stocks in last few years. All leads me to believe there may not be much growth in terms of the stock price in next 2-3 years.
Their cash flow doesn't looks sufficient to cover their dividend unless I am missing something here.
Thank you for your guidance.
How would you justify Telus's 135% payout ratio ?
Company earned 1.22 (2021) and 1.15 (2022) and paid dividend of 1.27 (2021) and 1.36 (2022)
Long term debt is increasing and they have almost doubled their common stocks in last few years. All leads me to believe there may not be much growth in terms of the stock price in next 2-3 years.
Their cash flow doesn't looks sufficient to cover their dividend unless I am missing something here.
Thank you for your guidance.
5i Research Answer:
Telus had 1.2B shares outstanding in 2013, and has 1.4B shares now. So the share count has only gone up 17% in a decade (there was a 2:1 split in 2020). On dividends, because of accounting non-cash charges, we prefer to look at cash flow rather than earnings. Last year T had operating cash flow of $4.8B, and paid dividends of $1.2B, for a payout ratio on cash flow of only 25%. The dividend was raised just three weeks ago. Even after capex and dividends T still generates decent cash flow. Debt has doubled since 2017, but assets have also nearly doubled as well. We do agree there is not huge earnings growth expected.