Seeking Alpha

We Love Our Cellphones - New Purchase

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Includes: BCE, RCI, SJR, TU
by: PassiveCanadianIncome

Good morning. With the weather all snowy and gloomy in mid April, I thought I would spend some money. I always feel pretty good after putting more money to work for us. Seriously though, spring can come any moment.

As you probably know, I love to DRIP my stocks and essentially put them in cruise control. Some stocks of mine don't have enough cash to enable a full DRIP but with time, I'd like to get them all to DRIP. This purchase bumps up one of my position's in my portfolio. I have been debating what to do for a while and hoping the market would pull back on all the recent news. It seems this market can't get shook. So might as well throw more cash at it slowly.

I wanted to add to my communication sector as it's lagging behind currently. Shaw (NYSE:SJR) is a full position, so I won't be adding there. I keep hearing negative news about their short-term future, but think it's overblown. We all know how hard it is to get into the cell phone business in Canada. Generally, it has always been the big 3 - Telus (NYSE:TU), Bell (NYSE:BCE) and Rogers (NYSE:RCI). Shaw is a new player, which should really add some needed competition and has a tonne of potential in the future.

THE GREAT DEBATE

Okay so the debate eliminates Shaw. I really don't care too much for Rogers personally to be honest as we don't do business with them. (I love buying stocks we actually use) We use Bell for my cellphone (Virgin Mobile) and our house internet. My wife uses Telus for her cellphone.

I already own 35 shares of Telus but the stock has basically been going sideways lately while Bell fell back a bit. I was debating selling our position in Telus and moving it all over to Bell, since it seems to offer a better price at the moment. Bell has a nicer yield currently of 5.57% vs. Telus's 4.53% but Bell has already boosted their dividend while Telus hasn't this year yet. Telus's 5-year average growth rate sits at 10.1% vs. Bell's 5.3%. If Telus boosts their dividend 10% this year, it would bring their yield to 4.97%

Telus holds a 14-year dividend growth streak vs. Bell's 9 years. I think on a dividend front, both companies are extremely close. While Bell's yield may be higher now, with Telus's dividend growth history that could be passed soon enough. Bell's P/E ratio is lower at the moment though at 17.4 vs. 18.1

As you can see, it's a pretty close debate. I know from personal experience Telus has way better customer service though, and in the battle for customers, this is going to be a major factor in the future.

While reading a fool.ca article comparing Bell and Telus, I came across this stat of Telus though. Telus has increased its wireless average revenue per user for 28 straight quarters. Yup 7 years straight! That sealed the deal, time to add to our Telus position.

THE BUY

Yesterday I decided to purchase 24 additional shares of Telus for a price of $1060. This will add $48.48 in forward dividends and also brings our yearly forward dividends over the $5,000 mark. That is just awesome. Unfortunately, our total position in Telus won't DRIP a full share yet but I intend to add to Telus before their next ex-dividend date. With the possibility of Canada raising their key interest rate, I decided to dollar cost average to see what the price is next month.

CONCLUSION

Well there it is, my retail therapy… haha! I don't see cellphones going anywhere in the future. If anything people will be spending more on crazy phones and bigger data plans. I can leave home without my wallet (if I don't need it) but if I forgot my cellphone, I got to go back and get it. We hit the 5k dividend mark and added more shares of a solid company. Today was a good day.

What are your thoughts? Are you reading this on your cellphone now?