Three questions:
1. Do you agree with the assessment of the analyst ?
2. The Analyst making the assessment is assigned only one star on a scale of five according to my broker. Does the fact that the analyst is assigned only one star makes his prediction less reliable?
3. What is your recommendation going forward for Telus ? Sell or hold ? Is there more downside risk? Although the dividend was increased twice in 2024 is there a risk of an imminent dividend cut ?
Thank you as always for your insight.
Please deduct as many credits as deemed necessary.
1) B of A makes a point of looking at free cash flow. But on an operating cash flow basis, T geenrated $4.8B in cash flow last year, and paid just $1.5B in dividends. Thus, it becomes a question of whether its non-operating spending is discretionary or not. Some is not (i.e. equipment maintenance) and some is. B of A also noted a subsidiary's cash flow is not available for dividends. This is technically true, as T can only get cash via dividends from the sub. But it could also monetize the subsidiary and this would simply eliminate this concern. So, we would not necessarily agree. Telus just increased its dividend in November. Some of its cash flow will of course result in growth in the future, as well. 2) The ranking of analysts is quite subjective. We would not give this point too much credence, good or bad. 3) We would view T as a HOLD, but as a BUY into any further weakness. Like BCE last year, it may go through a period of investor angst but ultimately should be OK. We certainly would not say a dividend cut is imminent and would not expect one.