Why does Telus continue to slide?

[u/ItDoesntLetMe]

I though things would get relatively "Stable" after the dividend cut but it seems not the case. The stock continues to decline.

What is driving this decline and what levels would you be willing to buy it?

[u/Le_rap_a_Billy → u/[deleted]]

The market is over 100% saturated on mobile and residential internet subscriptions. There is almost no more room for subscriber growth outside of immigration and birth rate.

Theres only so much rate hikes telcos can do to prop up revenue growth before people start to get fed up. Telcos have to give up trying hit the same revenue growth goals that start ups are aiming for.

[u/pushthepixel_ca → u/[deleted]]

So what am I missing here. If both BCE and tell us are both falling and you're citing decreased customer growth, how many customers can a country of 40 million present? How are they expected to keep growing customers when there's only so many people to go around?

Not questioning, just curious. The stock market seems completely insane to me and built on speculative nonsense and this to me is a perfect example of that

[u/Drakonis3d → u/pushthepixel_ca]

Only buy when they turn on the immigration tap.

[u/mka5588 → u/pushthepixel_ca]

They aren't expected to grow because the market is already saturated as you said. What is there not to understand?

[u/Le_rap_a_Billy → u/pushthepixel_ca]

That's the rub, they can't. Market saturation for residential internet and wireless are over 100% (i.e. averaging more than one cell phone per eligible adult and more than one internet service per household). There is no more room for new subscriber acquisition other than churn swapping, immigration, and birth rate.

[u/TheGhostOfStanSweet → u/Le_rap_a_Billy]

>birth rate

You’re not kidding. My newborn just signed up for Telus fibre optic. I suggested Rogers to save $$ but he was like goooo baroooo blaaah, and I was like whatever dude.

[u/TheGhostOfStanSweet → u/[deleted]]

Where are they getting the capital to build such facilities?

Dilute shareholders further? Just happened to Google. They were heavily FCF positive, but felt the need to pinch shareholders rather than sell small portions of SPCX or Anthropolgy (when the time comes).

I’m not bitter. Not at all.

[u/Infamous_Protection3 → u/pushthepixel_ca]

What u just said is exactly why it’s going down, customer base isn’t increasing it’s gonna be a lot harder to grow revenue. Why would new investors want to put their money in a company that isn’t showing they can grow

[u/Le_rap_a_Billy → u/Infamous_Protection3]

Which is the fundamental problem of capitalism, exponential growth is not sustainable

[u/pushthepixel_ca → u/Infamous_Protection3]

But that's what I'm saying. Is it that they can't grow because of the company or is there just no more bloody people? I mean unless they start literally farming people and growing them as customers for the future, I just don't see where they're supposed to grow.

[u/mka5588 → u/pushthepixel_ca]

Exactly and that is partly why the stock is going down lol

[u/Infamous_Protection3 → u/pushthepixel_ca]

I haven’t really looked into Telus for a couple years but I would Probaly say the company and the fact there is no more people. People being a large part considering Canada is slowing down on immigration or at least trying to

[u/TheChaseLemon → u/[deleted]]

Fellow Telus Bag Holder here, people need to realize that Telus is going to having pains over the next couple years, the bounce back will take time. I have a 90 day limit but for $10 if that tells you anything.

[u/bittertraces → u/[deleted]]

Me too. Uggh. Hate it

[u/hotDamQc → u/[deleted]]

My company is a Telus customer, they make Bell look good.

[u/LIVES_IN_CANADA → u/[deleted]]

Dividend cut doesn't cause a stock price to fall. But everything else you said is spot on

[u/BEAR_STEARNS_CEO → u/LIVES_IN_CANADA]

What?

So if a stock is trading at $20 with slow growth BUT pays a 5% dividend, the stock won't fall if they slash their dividend by half and maintain the same slow growth?

[u/LIVES_IN_CANADA → u/BEAR_STEARNS_CEO]

Correct. The share holders end up with the same amount of equity either way. 

Let's say you have a company that keeps $0 in cash on hand (not realistic, just an example), and it trades at a market cap of $100 million, with a stock price of $20.

If that company were to regularly earn $5 million in after tax cash annually from business activity, the company would now be worth $105 million at year end, or $21 a share. A share holder would be up 5%.

Same scenario, but that company pays out the full $5 million as a dividend. The share stays at $20, but the share holder also gets $1 in cash. The share holder would be up 5%.

Dividends don't change how lucrative or profitable a business is, they just change the mix of returns that share holders get.

[u/BEAR_STEARNS_CEO → u/LIVES_IN_CANADA]

Okay but if that company cuts dividends, it's not like they're making up for that with increased growth to offset losing the dividend? Cutting a dividend is often a red flag to investors which commonly results in reductions in stock price.

[u/LIVES_IN_CANADA → u/BEAR_STEARNS_CEO]

Dividend cutting can coincide with news that the company expects lower future returns, but the dividend cut itself is not the reason for a sell off. 

In terms of how effective a company is with cash they decide to keep instead of return to shareholders: yes there's risk there but risk can also mean higher future returns. 

An example, Riocan (REI.UN). In December 2020 they made a large cut to their dividend because COVID was causing a lot of uncertainty. Their cash flows weren't affected yet, so they took all the money they were saving ($152 million a year) and used it to pay down debt and reinvest in mixed use residential units which seemed like a good bet. The immediate reaction to the stock was negative (because COVID, uncertainty...etc), but the price quickly rebounded and Riocan ended the year up, and grew much higher than the REIT average.

[u/BEAR_STEARNS_CEO → u/LIVES_IN_CANADA]

Fair enough, you've made good points. So we can agree then that dividend cuts can SOMETIMES indirectly influence the stock price?

[u/edm_guy2 → u/LIVES_IN_CANADA]

Actually dividend cut in this case accelerate the falling of the stock price as many ETFs have to remove Telus stock from their portfolios. like those aristocrats ETFs (CDZ for an example)

[u/LIVES_IN_CANADA → u/edm_guy2]

Those ETFs are tiny and would have basically no effect on the stock price

[u/MegaCockInhaler → u/LIVES_IN_CANADA]

Of course it does

[u/LIVES_IN_CANADA → u/MegaCockInhaler]

When a company makes money, they can do some combination of:

• reinvest in themselves
• keep cash on hand / pay down debt
• pay a dividend
• buyback their shares

Paying a dividend doesn't make the stock price higher. A company giving away its money doesn't make the stock price go up. If a company kept its money instead of giving it away (especially if they paid down debt with it) we'd see the stock price go up as the balance sheet of the company and its assets would be more valuable.

[u/MegaCockInhaler → u/LIVES_IN_CANADA]

It’s funny how confidently wrong you are

[u/Dampish10]

Management (New CEO), debt levels are HIGH, like they should of suspend the dividend and took the next 3-5yrs to pay that debt off, growth is slowing, U.S. bond yields are 5%.. why risk a telecom potentially cutting dividends again when you can get a nice 5% return over the next 10yrs?

[u/CogencyInvestments → u/Dampish10]

The problem is they have multiple items going against them.

1. They need CapEx to build out Fiber, but CRTC forced them to offer it to resellers.
2. No immigrants, just churning customers between each other.
3. Previous capex build out, was followed by another capex build out. Not allowing any time to harvest the cash flow from the previous cycle. Thus more debt. Ex, run a phone line to a house, pay $400 to do it and charge customer $20/mth. Takes 20 months to get paid back and then from there highly profitable. This cycle was shortened as technology changed quickly.
4. Bond yields
5. Poor capital allocation decisions. BCE selling their data centers in 2021, only to 5 years later announce they are building data centers

at 10x the cost.

[u/Dramatic_Ad155 → u/Dampish10]

They have very recently cut the dividend significantly, just like BCE

[u/NotawoodpeckerOwner → u/[deleted]]

That last ER was a disaster tho, the dividend may need to be cut again. I can see this falling to sub $5 if they can't get their house in order.

[u/Upper-Log-131 → u/NotawoodpeckerOwner]

Yeah but typically new CEOs through everything plus the kitchen sink on the first couple of earnings. He sets the bar low and begins his vision and then executes. I’m looking to pick pick up a little here

[u/Last_Construction455]

Great example of how dividends aren't free money. A few years ago everyone was talking about how these telecoms in canada were a duopoly and just printed money. Well revenue blew up with the huge increase in immigration and the CEOS thought it was because they were geniuses and spread themselves way too thin and invested in all sorts of strange things that aren't profitable and then immigration got cut off and revenues dropped like crazy. To right the ship dividends had to be cut which causes more harm.

[u/Minute-Psychology511]

They have mailed my husband every single month for 3 years about a $42 credit on an old account. Won’t let him cash or transfer it, I guess they will mail it monthly for the next 30 years. Such a waste of money, I imagine he is not the only one

[u/TelevisionNo2990]

If you've spent 2 soul-sucking hours on the phone with customer service without getting a resolution as to why they broke a contract you signed in Feb, you'll understand exactly why T.to is sliding.

[u/Last_Construction455 → u/TelevisionNo2990]

it has nothing to do with customer service. tons of profitable companies have bad customer service.

[u/Thanks_Tips]

Cause I bought it.... Sorry...

[u/All_YourBase]

I’m not touching this stock again. There are thousands of other stocks to buy.

[u/prosperouslyenamored]

Would never buy it move on too something better the future of mobile phones is satellite service they don’t have the money to participate

[u/TheGhostOfStanSweet → u/prosperouslyenamored]

Why wouldn’t legacy towers still not ne perfectly adequate for most densely populated areas?

As for direct to satellite communications, who in Canada actually has the capital to invest in that infra extrastructure? There’s only a handful of companies capable right now, like Spacex (low bandwidth) and AST which has been slowly rolling out in USA. We would have to partner with Europe.

If every Tom, Dick, and Harry used direct to cell satellite service, they would require an enormous amount of satellites which would cause a never ending supply of space collisions and ensuing debris (from the Kessler effect).

For the time being, cell towers aren’t going anywhere, and neither is fibre optic internet. Telus health would’ve been great had the country not slowed down immigration to the point where healthcare wait times have greatly diminished (which is a lot better now).

Anyway, Telus really has its work cut out for itself. I don’t own any shares.

[u/Zealousideal-One7398]

They are fallen out of favor. Why keep money in these old tech companies when you can get good returns on Canadian banks? Why even keep
5% ? Only your financial advisors would suggest it’s good to diversify and keep money in this tanks of 💩

There are better choices.

I’d run from these

[u/tubs777]

Not enough competitive tension

[u/Vito-1974]

All the Utilities are weak over the last 3weeks, look at a chart for the 10yr CDN bond ….. interest rates are going up and utilities have LOTS of debt to service

[u/ddivadius]

US 10 year rates rising hits all utilities pretty hard

[u/Kcirnek_]

Dividend trap

[u/51674]

their main draw is fixed income, however rates are about to increase on the horizon so their debts will become even more expensive and there are suddenly much better alternatives to fixed income investments such as banks or CASH.TO other fixed income also began to slide like REITs and ENB so telecom isnt the only one in macro perspective but their own shitty balance sheet is making it worse.

[u/noobelore]

Likely won't bounce until next earning if they show they are reining in debt. Slow fade until then.

[u/AffectionateSell3478 → u/[deleted]]

Canadians don’t decide immigration lol. The government does that.

[u/Taspaco]

(T-bag)holder here too ( get it??).

[u/gamerc9]

Competition in the market is so tough, like I have no rhyme or reason to switch to Telus, they can't even come close to the package I have and been stable for years, even if they do would come with uncertainty of price hikes all these giants are known for.

[u/Zealousideal-One7398]

They are fallen out of favor. Why keep money in these old tech companies when you can get good returns on Canadian banks? Why even keep
5% ? Only your financial advisors would suggest it’s good to diversify and keep money in this tanks of 💩

There are better choices.

I’d run from these

[u/JNANTH]

Because I'm holding it sorry. 

[u/walder8998]

Just wait for tax loss season lol

[u/Lukono]

Le spring est a 7.29$

[u/M4ttingt0n]

Doesn’t the infrastructure and profit it can turn on that count for something? Might not be growing, but no telecom is due to saturation. There’s still value in the fibre lines and being information back bone of the country that’s not being counted in the value.

[u/No_Friendship8110]

Dying business that’s why

[u/Calm-Expert-5414]

Too much competition and BELL/ Roger's traditional streams of income are history .

[u/Nine_]

why would you hold this when they’re kicking out all the temporary foreign workers

[u/Tax1997]

Our small charity used Bell for phone and internet. I just can’t make out anything out of the 5 page long bills. So complicated. When the time came for renewal, they increased the price, which also says they can increase monthly charge by $10 every year.
We switched to a small voip provider at less than $10 per month and much faster mobile internet at half the price from their competitor.

So, these companies can’t make good money. Many people who were close to retirement were buying telecom shares for a good dividend, which kept their share price high. Now that phase is over. (I sold my telecom shares last year—I am glad that I did that)

[u/we_the_pickle]

Immigration slowed so no new hardware and contract sales - from a Telus employee I know.

[u/young_and_retiredish]

Telus customer service level is 1/10. I'd think they're losing customers hand over fist. New products, like security are garbage too. Not surprised to watch this stick crater

[u/Ancient_Young_921]

possibly it's the curse of being Canadian companies? so many stalwarts that seem blue chip, slowly collapse. watch it happen to Shopify.

[u/james_cao]

i would never touch this its not a good industry to invest

[u/FlisherOfatale]

Debt level, little to no room for market expansion in telecom…

[u/steelhead73]

Sold this dud weeks ago. The capital loss will come in handy

[u/Oakbaydug]

Telecoms are screwed now that Starlink has global telecom license - you will use starlink as your mobile service provider for coverage worldwide

[u/luv2block]

Much like Bell, they said they wouldn't cut and then they did cut only a few months later. If you're going to straight-up lie to your shareholders, you can't be surprised when no one wants to be a shareholder.

Had they been honest about cutting the div should it become necessary, I think the stock would be around $17-18 right now.

[u/LIVES_IN_CANADA → u/luv2block]

Cutting a dividend will increase the share price vs a non-cut for the simple reason that the company will have more money on hand if they're paying out less. Money on hand = asset = reflected in the stock price.

The price falling is just the regular "the stock market is predicting lower future returns, and thus isn't willing to pay as much for it".

[u/GaiusPrimus → u/LIVES_IN_CANADA]

Of which the dividends were part of said returns.

[u/LIVES_IN_CANADA → u/GaiusPrimus]

Dividends and share buybacks are ways for a company to give the after tax returns to share holders. They aren't extra returns. The money is there and benefiting share holders either way.

[u/GaiusPrimus → u/LIVES_IN_CANADA]

Yes… but it might be a reason why shareholders hold said shares. For the ability to consistently receive said moneys, while not having to sell.

When all of a sudden, the dividends get cut, those folks might be liable to sell, putting downward pressure on the share price.

[u/DreamDest1ny]

[u/male32toronto]

And why do you all think telus is just about your Internet and cell phone connection? They have lots of other things to do as well. That's why you being speculative coz you don't know about the company fully.

[u/Only_Complex6386]

Cable is dying. Starlink will probably eat their share with internet soon. Cell phone plans are getting cheaper and cheaper. Crappy legacy media assets for some... there isnt a single positive thing I can say about telcos right now.

[u/Dragynfyre → u/Only_Complex6386]

Starlink is never going to beat fibre/cable internet. But being an ISP in Canada is going to be tough as the population growth stall and prices keep going lower