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Charts in Focus: Dividend Growth of Telus and Nielsen Holdings

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Wireless communications

In this article, we’ll discuss the dividend growth trajectory of Telus and Nielsen Holdings. Telus Corp. (TU) has recorded year-over-year (or YoY) revenue growth in the past seven years. Telus’s Wireless and Wireline segments drove its revenue growth and EPS growth for 1Q17.

Growth in Telus Corp.’s (TU) 2016 and 1Q17 operating income offset its rising interest costs, translating into EPS growth. Increased capex had offset the growth in operating cash flow for 1Q17 and fiscal 2016, leading to declining free cash flow for these periods. The company updated its 2017 outlook, driven by its strong 1Q17 results amid intense competition.

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Telus Corp.’s dividend growth

Telus Corp. (TU) recorded five-year annualized growth of 11%. However, it recorded three-year annualized growth of ~2%, and it recorded the same growth rate in 2016. Telus has consistently increased its dividends since 2005.

The wireless communications company is trading at a discount of 12% to its sector average PE multiple and has a dividend yield equivalent to 128% of the sector average dividend yield. Telus had a payout ratio of 75.9% and 87.4% for 2016 and on a TTM basis, respectively.

Telus has increased its 2017 outlook, driven by strong results amid intense competition. The company’s YTD prices have recorded an appreciation of 10.2%, and its stock price rose 0.9% on June 27.

Neilsen Holdings’ revenue growth

Nielsen Holdings (NLSN) has recorded revenue growth for 1Q17 and fiscal 2016, driven by its Watch segment and emerging markets. Its EPS performance for 2016 and 1Q17 was overshadowed by stronger performance in 2015 and 1Q16.

Nielsen Holdings has recorded YoY growth in free cash flow for the last six years. However, 1Q17 proved to be an exception, driven by lower operating cash flow and higher capex.

Neilsen Holdings’ dividend growth

Nielsen Holdings (NLSN) recorded three-year annualized growth of 19% while it grew 11% in 2016. The information and delivery services company is trading at a discount of 34% to its sector average PE multiple and has a dividend yield equivalent to 76% of the sector average dividend yield. 

Nielsen recorded payout ratios of 72.8% and 93.9% for 2016 and on a TTM basis, respectively. Its stock price fell 5.7% on a year-to-date basis and on June 27, its stock rose 0.5%.

The First Trust NASDAQ Technology Dividend Index ETF (TDIV) has an annual dividend yield of 2% and a PE multiple of 18.2x. The First Trust Morningstar Dividend Leaders Index ETF (FDL), valued at 18.4x, has an annual dividend yield of 3%.

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