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Telus to acquire Canadian ADT

This acquisition furthers communications stock Telus’ plan to bring state-of-the-art convenience, control and safety into the lives, homes and businesses of more Canadians.

Telus has agreed to acquire ADT Security Services Canada, Inc. for about $700 million. ADT Canada is one of Canada’s leading providers of security and automation solutions serving residential and business customers, with about 500,000 customers.

telus [1]

Telus is acquiring ADT Canada to leverage its existing wireless and PureFibre networks.

The acquisition builds on Telus’ strategy to leverage its wireless and PureFibre networks to enhance connected home, business, security, IoT (Internet of Things), cybersecurity, smart building, smart cities and health services for its customers in Canada.

Acquisition adds to current security offerings

Recognizing that home and business security is important to its customers, the company launched Telus SmartHome Security and Secure Business last year. The ADT acquisition not only helps Telus to expand these businesses, but also supports its health strategy. This includes enabling Canadians with remote patient care to access home health monitoring and allowing elderly citizens to enjoy independence with connected technology in their own home.

Telus Corp. (TSX—T) is a communications company with 14.6 million customer connections spanning wireless, data, internet protocol, voice, television, entertainment, video and security.

The company has delivered modest adjusted earnings growth so far this year. For the six months ended June 30, 2019, Telus made $869 million, or $1.45 a share, compared with $849 million, or $1.42 a share, in the same period of 2018.

Increased financing costs limited bottom-line growth after a more robust revenue performance. Revenues rose 4.0 per cent to $7.1 billion. Service revenues increased 4.6 per cent to $6.1 billion, mainly due to growth in wireless network revenue and wireline data services revenue.

Telus continues to increase dividend

Telus increased its quarterly dividend 3.2 per cent to $0.5625 a share in the first half. The increase reflects management’s intention to target ongoing semi-annual increases, with annual increases in the range of seven to 10 per cent through to 2022.

Projected dividend growth is underpinned by the company’s expectations of strong cash flow generation and growth over this period. Strong cash flow generation from investments has let the company return $17 billion to shareholders through dividend increases and share buybacks since 2004. That amounts to about $28 a share.

If the business environment remains favourable enough, Telus should do better next year than this year. The company’s adjusted earnings per share (EPS) is expected to increase just 2.5 per cent in 2019. But EPS is projected to rise 7.2 per cent in 2020, thanks partly to share buybacks.

Telus plans to drive long-term growth by leveraging its broadband networks, fueling efficiency gains and taking advantage of emerging opportunities in Telus Health and Telus International. As far as broadband is concerned, the company continues to invest in connecting more homes and businesses to its PureFibre, 100-per-cent fibre optic internet network.

The stock trades at a reasonable 16.3 times the $2.92 a share that Telus will likely earn in 2019. The annual dividend of $2.25 a share yields 4.7 per cent. Telus is a buy for growth and income.

This is an edited version of an article that was originally published for subscribers in the October 18, 2019, issue of Money Reporter [2]. You can profit from the award-winning advice subscribers receive regularly in Money Reporter. [2]

Money Reporter [2], MPL Communications Inc.
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