I initiated a new position in Rogers Communications, Inc (NYSE:RCI, TSE: RCI.B). Rogers is a diversified communications and media company and together with BCE Inc. (NYSE:BCE) and Telus Corp. (NYSE:TU), forms The Big-3. Rogers is Canada's largest provider of wireless and data communications services and also one of the leading providers of cable television, high-speed internet and telephony services.
Corporate Profile (from FinViz):
Rogers Communications Inc. operates as a communications and media company in Canada. The company's Wireless segment offers voice and high-speed data services, as well mobile devices and accessories. It markets its products and services under the Rogers, Fido, and chatr brands. Its Cable segment offers cable television, high-speed Internet access, and cable telephony services. As at December 31, 2012, this segment had 2.2 million television subscribers; and 1.9 million high-speed Internet subscribers, as well as provided home phone services to approximately 1.1 million customers. It also offers a digital video, including a range of television programming and features, such as HDTV; Internet services with multiple tiers of high-speed broadband. This segment provides its products through stores and e-business Websites. The company's Business Solutions segment provides wired telephony, data networking, and Internet protocol (IP) services for Canadian businesses and governments, as well as to other telecommunications providers on wholesale basis. This segment offers voice, data, IP, and ethernet solutions to small, medium, and large businesses; governments; and financial institutions, as well as provides a multi-service suite of services over high speed fiber, cable, and wireless network. Its Media segment offers television and radio broadcasting, televised shopping, sports entertainment, publishing, and digital media. It operates 55 radio stations across Canada; various television properties, including the City network, 5 multicultural OMNI stations, Sportsnet, specialty sports television services, and various other specialty channels; nationally televised shopping service, The Shopping Channel; the Toronto Blue Jays Baseball Club; Rogers Centre, a sports and entertainment facility; and approximately 50 consumer magazines, and trade and professional publications. The company was founded in 1920 and is headquartered in Toronto, Canada.
Recent Buy Decision:
My analysis entitled Canadian Telecom Oligopoly Provides Sustainable Dividend Growth delves deeper into the stronghold of The Big-3. Rogers already dominates the wireless market with a market share of approximately 35% of Canada's wireless subscribers. With the acquisition of MLSE in 2012 and a 12-year broadcast and multimedia deal with NHL in 2013, Rogers has been expanding its media segment extensively, which in-turn provides richer content and support for the company's cable business. Going forward in 2014, the big news seems to be Rogers preparing to launch an online streaming service that would compete with Netflix (NASDAQ:NFLX). Rogers Communications Inc. is a component of the S&P/TSX 60 index and has been paying dividends since 2000. Rogers has raised dividends 9 years in a row with a 5-yr dividend growth rate (DGR) of 14.7%.
Yesterday's fourth quarter results release showed that the profits dropped on a decline in wireless revenue due to lower-priced roaming plans and simplified sharing packages that cut into revenue growth. I am not too concerned with this and see the 5% drop in share price as a buying opportunity, in what is a short-term stumble with Rogers retaining its customers amid falling wireless rate plans across the industry.
Rogers announced that it will be raising its dividends by 5% from an annual dividend of $.174 to $1.83. In addition, Rogers has authorized a renewal of the share buyback program for the purchase of $500M of stock for another one-year period.
The biggest risk for Rogers is an entry of new wireless service providers in Canada. The Federal government wants to promote competition and the entry of any new service provider would result in lost market share. This, for now, seems unlikely as Verizon Communications (NYSE:VZ) and AT&T (NYSE:T) in 2013 decided not to enter the market, seeing that the market could not support a fourth player.
On the cable front, consumers have also started cutting the cord and shedding their cable services to move to online content instead, which could see challenges in Rogers' cable segment. But this is where Rogers plans to target the consumers with the online streaming service. Rogers, being a cable and internet service provider, already has an advantage and is rumored to promote its own service so that customers do not have to worry about bandwidth caps. This could possibly backfire on Rogers as the industry observers are crying foul and see an antitrust case in the making.
A summary of the stock:
- Symbol: TSE: RCI.B (also trades at NYSE: RCI)
- Quote: $43.28
- 52-week Range: $40.18 - $52.75
- P/E: 11.93
- Yield: 4.22% (after yesterday's dividend increase)
- 5-yr average yield: 3.4%
- 5-yr DGR: 14.7%
- Graham Number: 26.96
- Chowder Rule: 18.7
Disclosure: I am long RCI.B and BCE. My full list of holdings can be found here.