Thursday, March 24, 2011

Shaw Communications (SJR.B) Dividend Stock Analysis

Another Canadian Dividend Aristocrat on my watch list is Shaw Communication (SJR.B). This is a relatively new dividend payer and not one of the long standing dividend paying companies like the Canadian banks.

Shaw was primarily a cable company in the past and re-invented itself into a diversified communication and media company providing consumers with :

  • Broadband Cable Television
  • High-Speed Internet
  • Home Phone
  • Business Telecommunications Services
  • Satellite direct-to-home services
  • Programming content (through Shaw Media)
The last service from Shaw is very recent as they purchased Global Television from Canwest and cleared all regulatory hurdles. The new television content provides them with 19 specialty channels. The purchase of Global was a big win as competition was present across the major telecommunication companies. The race for exclusive content seems to be on and Shaw has its content. Rogers Communications has some exclusive sports content as well. As the internet becomes even more prevalent for watching content, these moves should prove to be profitable.
Shaw also owns a wireless spectrum and is working hard to enter the fierce and lucrative wireless business. It has already spent a significant amount of money and we should see them enter the wireless segment later this year or in 2012.

Most recently in the news, the torch was passed down to one of the sons to take control of the company and yesterday, the company announced they are cutting nearly 4% of the workforce across Canada. It should be seen as positive news for the investors.

Quick Facts

  • Stock Ticker: SJR.B on TSX, SJR on NYSE
  • Market Cap.: 8.97B$
  • P/E: 20.57
  • Forward P/E: 12.59
  • EPS: $1.00
  • Beta: 0.32
  • Monthly Dividends: $0.08
  • Dividend Yield: 4.65%
  • Dividend Payout Ratio: 69.92%
  • ROE: 15.34%
  • 5 Year EPS Growth Average: 21.72%
  • 5 Year Dividend Growth Average: 49.61%
  • 52-Week Low: $18.37
  • 52-Week High: $23.50
  • 52-Week Range: 44.25%

SJR.B Stock Chart


Dividend Growth

As I mentioned above, Shaw is a recent dividend payers but it has demonstrated to pay a comparative dividends to its peers while continuing to invest in their business. I do like that it pays its dividend monthly as it allows for a faster compound growth.

SJR.B Dividend Growth


Dividend Payout Ratio

For 2011, their payout ratio is on the rise. It's estimated to be at 92% based on expected earnings and its current dividend payout. That's quite high and above its competitors. Comparatively speaking, its Canadian competitors are all doing better except one.
  • Bell Canada is at 69%
  • Telus is at 65%
  • Rogers is at 53%
  • Manitoba Telecom is at 107%
A good payout ratio in the telecom industry should be around 50% to allow them to improve their infrastructure and stay competitive.

SJR.B Dividend Payout Ratio


EPS Growth

The rise in EPS is consistent with other telecoms and I believe it signifies the turning point for telecoms when services (internet, HD cable, and wireless) were not deemed a luxury but a necessity.
SJR.B EPS Growth

SJR.B EPS Growth


Thoughts

I have written that Telecoms are essentially utilities and I just noticed that Telus is categorized as a Utility while Shaw is categorized as a Communication & Media company by the Globe & Mail. Telecoms have regular subscriber paying monthly (and hardly defaulting) making them regular cash cow. They may run into hurdles from time to time and you need to watch for that for possible entry points.

I believe that Shaw is going through one of those hurdles and it's worth monitoring it as it positioned itself strongly to benefit and leverage its assets in the future. The wireless segment will be tough to crack but they have subscribers to offer discount to. All they need to do is wow them and offer a stable network. Rogers and Telus made 40% of their revenue from the wireless sector in the past and Shaw could reach that.

Readers: What do you make of Shaw Communications?

Full Disclosure: At the time of writing I hold no position in SJR.B. Long BCE, Telus, AT&T and RCI.B

Disclaimer: The material presented should not be considered a recommendation. You should always do your own research and reach your own conclusion.

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