Canadian telecom company TELUS Corporation (TU) announced its plans to repurchase 4 million shares. This share buyback program is part of its 15 million share repurchase authorization announced on May 21, 2013.
We believe that the company’s focus on improving balance sheet position is playing a pivotal role in maximizing shareholders returns. Further, the carrier’s attractive market position in the Canadian wireless business also bodes well for long-term synergies.
Telus has so far remained successful in expanding its wireless subscriber base, marketing of smartphones like Apple Inc.’s (AAPL) iPhone, improving churn (customer switch), increasing average revenue per unit, accelerating wireless data services and growing wireline fiber optic networks. As a result, the company expects these parameters to support its financial position without additional financial leverage.
Consequently, the company will see earnings growth on lower financing costs and higher EBITDA of $250 million by 2015. In addition, Telus expects free cash flow growth on reduced cash taxes and employer pension contributions, despite continued investments in the expansion of both wireline and wireless services.
The consistent earnings performance and strong free cash flow has resulted in management’s commitment to return value to shareholders through attractive dividends and share buybacks. The company expects a payout ratio between 55% and 65% of net earnings over the long term.
In May, Telus raised its quarterly dividend to C$0.34 per share from C$0.32, paid previously. The move is in sync with the company’s plan to hike dividend twice every year — expectedly in May and November.
In addition, the company increased its dividend growth program by another three years from 2013 to 2016, with projection of semi-annual dividend growth of approximately 10%. Further, the previously announced two-for-one stock split of common shares was completed on Apr 17.
Going forward, the company also expects its latest repurchase program to increase to $2 billion by 2016. Together with share purchase and dividend payments, the company targets to return up to $6 billion or around C$10 per share through 2013–2016 to its shareholders.
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