The Best Telecom Stocks In Canada Right Now
In this series, we reviewed all of the TSX and TSX Venture’s stock and came up with what we think the best candidates are. Here are the Best Telecom Sector Stocks In Canada, as well as the methodology that got us there.
(Updated Jan 31, 2023) A telecom stock is a company that provides telecommunications services. These stocks are usually found in the telecommunications sector of the stock market.
Some well-known telecom stocks include AT&T (T), Verizon Communications (VZ), and Sprint Corporation (S). Their Canadian counterparts are Rogers Communications (RCI.B), Bell Canada (BCE), and Telus Corporation (T).
One reason why investors may choose to invest in telecom stocks is that the telecommunications sector is generally considered to be defensive in nature, meaning that it tends to be less volatile than other sectors during economic downturns. This can provide some stability for an investor’s portfolio.
Another reason to invest in telecom stocks is that the sector is expected to experience strong growth in the coming years as more and more people around the world adopt mobile devices and connect to high-speed wireless networks. This growth potential makes telecom stocks attractive long-term investments. It also requires the incumbents in the space to invest heavily in CAPEX to sustain the networks.
Well-Regulated Cash Producing Oligopolies
There are a few things to keep in mind before investing in telecom stocks.
One is that the sector is highly competitive, and consolidation is common. This means that investors need to carefully research the companies they’re considering investing in and understand the competitive landscape.
Another thing to keep in mind is that the telecommunications sector is regulated by governments around the world. This can make it difficult for companies to turn a profit. Investors need to be aware of this risk before investing.
Finally, the telecom sector is subject to rapid changes in technology. This means that companies need to constantly invest in research and development in order to stay ahead of the curve. This can be a risk for investors. But it also provides opportunities for those who are able to identify promising new technologies early on.
Methodology For Ranking The Top Telecom Stocks In Canada
We’ve first made sure that the company has a Return on Equity higher than 14%. This is a high bar for telecom companies given everything we described above. Companies passing that filter are well off. We’ve also made sure that the companies had consistent long term revenues. Positive earnings were necessary for the past 4 years. This is not usually a problem for the telecom sector, but it weeded out certain more lumpy companies.
The filter revealed 21 companies, but only one that is cheap and large enough to make the cut.
We’ve then sorted the top Canadian telecom sector companies by free cash-flow yield – the best metric to differentiate a good from a bad investment – highest to lowest:
- Y, with a PE ratio of 5, 27% free cash-flow yield and a solid 4.2% dividend yield, Yellow Pages Limited takes the gold for the best Telecom stock in Canada Right Now. This company underwent a massive restructuring and still carries heavy debt and employee liabilities to this day, but it seems like the worst is over. If they can continue stabilizing the business and maintain profits, their cash flows should be high enough to cover these liabilities in the future.
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