Monthly Dividend Stock In Focus: Shaw Communications

Up to date on Might 18th, 2021 by Bob Ciura

Shaw Communications (SJR) is a uncommon inventory. It’s based mostly in Canada, and is the one telecom inventory with a month-to-month dividend. The inventory is listed in each New York and Toronto, and we’ll be utilizing the latter all through this text, except in any other case famous.

Whereas the U.S. telecoms like Verizon (VZ) and AT&T Inc. (T) pay quarterly dividends, Shaw’s month-to-month payouts enable buyers to compound their dividend progress extra rapidly.

Certainly, Shaw is one among simply 56 shares that pay month-to-month dividends. You’ll be able to obtain a full record of all month-to-month dividend shares, plus essential monetary metrics like dividend yields and price-to-earnings ratios, by clicking on the hyperlink under:

The opposite benefit for Shaw is it’s exterior the highly-competitive U.S. wi-fi market.

Shaw is rising subscribers and income, which fuels its 4% dividend yield. In mid-March, Shaw agreed to be acquired by Rogers Communications (RCI) for C$26 billion, which works out to roughly US$21 billion.

Nevertheless, the deal has not acquired regulatory approval. As a result of the merger will not be but a certainty, Shaw stays a lovely possibility for revenue buyers.

Enterprise Overview

Shaw Communications was based in 1966 because the Capital Cable Tv Firm. It has since grown to turn into Western Canada’s main content material and community supplier, catering to each customers and companies. The corporate produces over $4 billion USD in income every year.

Shaw Communications is a large-cap inventory with a market capitalization of $15 billion.

The inventory is listed in each Canada and the U.S. and it’s a diversified telecommunications firm. The corporate not too long ago consolidated its 4 prior reporting segments into simply two main segments, Wi-fi and Wireline. The Wi-fi section contains service and associated gear, whereas the core Wireline section contains client and enterprise companies.

Shaw supplies prospects with all kinds of companies, together with satellite tv for pc video, fiber-coax community connectivity, and cell phone companies, amongst others. The corporate serves customers and small to medium companies in its service space, which largely contains Canada. The majority of the corporate’s income is from client companies.

Shaw has struggled a bit in recent times to develop earnings because it has undergone a strategic transformation. Over the previous a number of years, it has acquired Freedom Cell, divested the Shaw Media and ViaWest companies, and bought wi-fi spectrum. These modifications have left the corporate extra centered on its long-term targets of sustainable progress.

Progress Prospects

Shaw reported second quarter outcomes on April 14th. Consolidated revenues for the second quarter elevated 1.8% to $1.39 billion CAD. Adjusted EBITDA elevated 6.2% to $637 million CAD. Web revenue grew 30% to $217 million CAD. Diluted earnings per share of $0.43 CAD grew 34% over final yr.

Wi-fi led the way in which in the latest quarter.

Supply: Investor Presentation

For the primary half of 2021, diluted EPS has grown 17% over final yr. The corporate’s wi-fi choices underneath the Shaw Cell model led to sturdy wi-fi outcomes, and a robust 75,100 web additions. Second quarter wi-fi service was greater by roughly 8.5% yr–over–yr because of subscriber progress. Wi-fi postpaid churn charge of 1.25% was a 32 foundation level enchancment over the prior yr.

Dividend Evaluation

Shaw’s present month-to-month dividend charge is roughly $0.098542 per share in Canadian {dollars}, and it has paid the identical month-to-month dividend charge since March 2015. On an annualized foundation, this comes out to roughly $1.18 per share. Buyers ought to take into account that since Shaw relies exterior the U.S., the dividend is uncovered to forex danger because the dividend is said in Canadian {dollars}.

As currencies fluctuate, the dividend charge is topic to alter, as soon as it’s translated again into U.S. {dollars}. Based mostly on prevailing alternate charges, Shaw’s dividend comes out to roughly $0.98 per share in U.S. {dollars}. Due to this fact, the currency-adjusted dividend yield is 4%. Shaw’s yield is decrease than AT&T’s 5.6% yield, however is greater than Verizon’s 4.3% yield. Shaw has the added benefit of month-to-month dividend payouts, which might be interesting for revenue buyers wanting much more frequent funds.

One other essential consideration for investing in international firms is withholding taxes. Dividends acquired in Canadian {dollars} are usually topic to a 25% withholding tax (15% for many U.S. buyers). Nevertheless, there may be an exception for Canadian shares – the withholding tax is waived for U.S. buyers who maintain the inventory in a professional retirement account, similar to a 401(ok) or IRA.

Shaw’s historical past of returning capital to shareholders is critical, even when it hasn’t raised the payout since 2016. The dividend was raised briskly up till 2016, however Shaw’s main enterprise transformation precipitated it to pause on payout will increase.

General, we view the dividend as sustainable, barring a serious recession or enterprise downturn. Shaw’s free money movement steerage and earnings outlook have each improved considerably and we see the corporate rising its means out of the precariously financed dividend scenario.

Definitely, buyers would have favored dividend will increase previously few years, however Shaw merely couldn’t afford it. Now, we consider these days to be over and progress within the payout can resume in some unspecified time in the future within the comparatively close to future.

Importantly, Shaw’s steadiness sheet is wholesome. It has an funding grade credit standing from Customary & Poor’s and a net-debt-to-adjusted EBITDA ratio of two.4x on the finish of final quarter. Its leverage ratio is barely under its goal vary of two.5x-3.0x.

Ultimate Ideas

When buyers consider telecoms, they possible consider AT&T and Verizon. These are each very sturdy dividend shares, however there may be sturdy telecom shares exterior the U.S. which can be price contemplating.

Shaw has a robust enterprise mannequin, progress potential because of income will increase and margin growth, and its 4% yield is now safer than it has been in recent times. Plus, Shaw offers buyers the added bonus of dividend funds every month.

One notable caveat is that Shaw has an settlement in place to be acquired by Rogers Communication. The deal has not acquired regulatory approval, and there may be nonetheless some probability that Shaw will stay an impartial firm. Due to this fact, it’s nonetheless an investable inventory.

General, we see Shaw as engaging for buyers that desire a comparatively excessive yield that can also be paid month-to-month.