Updated May 18, 2021 by Bob Ciura
Shaw Communications (SJR) is a rare stock. It is based in Canada and is the only telecommunications stock with a monthly dividend. The stock is listed in both New York and Toronto, and we will use that throughout this article unless otherwise noted.
While U.S. telecommunications companies like Verizon (VZ) and AT&T Inc. (T) pay quarterly dividends, Shaw’s monthly payouts allow investors to grow their dividend growth faster.
In fact, Shaw is one of only 56 stocks that pay monthly dividends. You can download a full list of all monthly dividend stocks, as well as key financial metrics like dividend yields and price / earnings ratios, by clicking the link below:
The other benefit for Shaw is that it’s outside of the highly competitive US cellular market.
Shaw is growing subscribers and sales, which boosts the 4% dividend yield. In mid-March, Shaw agreed to be acquired by Rogers Communications (RCI) for $ 26 billion, roughly $ 21 billion.
However, the deal has not received regulatory approval. With the merger not yet certain, Shaw remains an attractive option for high-income investors.
Shaw Communications was founded in 1966 as the Capital Cable Television Company. Since then, it has grown to become Western Canada’s leading content and networking provider, targeting both consumers and businesses. The company has annual sales of over $ 4 billion.
Shaw Communications is a large-cap stock with a market capitalization of $ 15 billion.
Listed in both Canada and the United States, the stock is a diversified telecommunications company. The company recently merged its four previous reporting segments into just two main segments: wireless and wireline. The wireless segment comprises services and associated devices, while the core wireline segment comprises consumer and business services.
Shaw offers customers a wide variety of services, including satellite video, fiber-coaxial network connectivity, and cellular phone services. The company serves consumers and small to medium-sized businesses in its service sector, which mainly includes Canada. Most of the company’s revenue comes from consumer services.
Shaw has struggled a little bit increasing earnings over the past few years as it went through a strategic transformation. In recent years, the company has taken over Freedom Mobile, sold the Shaw Media and ViaWest businesses, and acquired the radio spectrum. Because of these changes, the company has focused more on its long-term goals of sustainable growth.
Shaw reported on the second quarter results on April 14thth. Group sales rose by 1.8% in the second quarter 1.39 billion CAD. Adjusted EBITDA increased 6.2 percent to $ 637 million. The net profit increased by 30% CAD 217 million. Diluted earnings per share of $ 0.43 growth 34% compared to the previous year.
Wireless led the way in the last quarter.
Source: Investor Presentation
For the first half of 2021 The diluted EPS grew by 17% compared to the previous year. The company’s wireless offering under the Shaw Mobile Brand led to strong wireless results and a strong 75,100 net Additions. The mobile service in the second quarter was around 8.5% higher than in the previous year– –over– –Year due to subscriber growth. Wireless The 1.25% post-payment churn rate was a 32 basis point improvement over the PRor year.
Shaw’s current monthly dividend rate is approximately $ 0.098542 per share in Canadian dollars, and has been paying the same monthly dividend rate since March 2015. On an annualized basis, this works out to an approximate dividend rate of approximately $ 1.18 per share. Investors should be aware that since Shaw is based outside of the United States, the dividend is exposed to currency risk as the dividend is quoted in Canadian dollars.
Because currencies fluctuate, the dividend rate may change once it’s converted back into US dollars. Based on prevailing exchange rates, Shaw’s dividend is approximately $ 0.98 per share in US dollars. The currency-neutral dividend yield is therefore 4%. Shaw’s yield is lower than AT & T’s 5.6%, but higher than Verizon’s 4.3%. Shaw has the added benefit of a monthly dividend payout, which could be attractive to high-income investors who want even more frequent payments.
Another important consideration for investing in overseas companies is withholding tax. Canadian dollar dividends are typically subject to 25% withholding tax (15% for most US investors). However, there is one exception for Canadian stocks: withholding tax is waived for US investors who hold the stocks in a qualifying retirement account such as 401 (k) or IRA.
Shaw’s history of returning capital to shareholders is significant, even though the payout hasn’t increased since 2016. The dividend rose briskly through 2016, but Shaw’s major business transformation resulted in the payout increases being interrupted.
Overall, we consider the dividend sustainable, barring a major recession or business downturn. Shaw’s outlook for free cash flow and earnings outlook have improved significantly, and we see the company growing its way out of its precariously funded dividend position.
Of course, investors would have wanted dividend increases in recent years, but Shaw just couldn’t afford it. Now we believe those days are over and the growth of the payout may resume at some point in the relatively near future.
The important thing is that Shaw’s record is healthy. The company has an investment grade rating from Standard & Poor’s and a net debt-adjusted EBITDA of 2.4x as of the end of the last quarter. The leverage ratio is slightly below the target range of 2.5x-3.0x.
When investors think of telecommunications, they likely think of AT&T and Verizon. These are both very strong dividend stocks, but there may also be strong telecoms stocks outside of the US that are worth considering.
Shaw has a strong business model, growth potential from increased sales and margin expansion, and its 4% return is more certain now than it has been in years. Shaw also offers investors the added bonus of dividend payments each month.
One notable caveat is that Shaw has made an agreement that Rogers Communication is about to take over. The deal has not received regulatory approval, and there is still a chance that Shaw will remain an independent company. Therefore, it is still an investable stock.
Overall, we see Shaw as attractive to investors who want a relatively high return that is also paid out monthly.
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