Quebecor – Possibly the best telecom opportunity

Quebecor is a leading Canadian company in telecommunications, entertainment, and news media. The company’s popularity can be measured by the fact that almost 55% of the population in Quebec read Quebecor’s newspapers.

Quebecor owns a 100% stake in Quebecor Media which operates through three business segments – telecommunications (Videotron – 78% of revenues), media (TVA – 17%), sports and entertainment (5%). Quebecor Media is one of Canada’s prominent telecommunications and media groups.

Quebecor’s brands are popular due to their high-quality and availability on multi-platforms in the form of bundled products. Its Videotron brand is a telecommunications and entertainment leader in eastern Canada.

Videotron has been named as Quebec’s most respected telecommunications provider for the 14th time in a row, while its TVA Network was the most-watched network in Quebec.

Investment Data

DISCLOSURE: Please note that links to merchants mentioned within this post might be using an affiliate link. Using an affiliate link means that, at zero cost to you, I might earn a commission if you buy something through that affiliate link.

Revenue Growth & Market Exposure

Videotron provides Internet, business and mobile telephony, cable television, private network, and data hosting solutions for businesses of all sizes in Quebec. Videotron has bagged one million subscribers to its home-grown mobile telephony service in just seven years of its launch.

The number of subscriber connections to the mobile telephony service stood at more than 1.36 million as of March 2020. Its TVA Network is a leader with a ~24% market share and a 90% average live viewing rate. Quebecor Media is pursuing a convergence strategy that captures synergies across its properties for the benefit of multiple distribution platforms.

Quebecor’s media platforms reach 99% of Quebecers every week and it is a leader in news media, book publishing, music recording, distribution of cultural products. Its Club illico is the most popular French-language subscription video on demand (SVOD) service in Quebec with more than 470,000 subscribers at the end of March.

Quebecor has been investing heavily to boost the capacity and speed of its wireline network over the past five years and has continued to roll out of ultra-fast service across its service area. Videotron bought 10 low-frequency blocks in the 600 MHz band. Quebecor’s home entertainment and management platform, HELIX made its debut in Quebec households in August 2019 and achieved more than 190,000 revenue-generating units.

The company has been in business for more than 60 years and is known for good customer service in Canada. It also enters into strategic partnerships with leading industry players from time to time. Quebecor is a leader in technological changes and is gearing up for the deployment of LTE-A and 5G access networks, along with Samsung.

The pandemic-induced lockdown has curtailed the operations of many of Quebecor’s business partners and has led to a significant slowdown in some of Quebecor’s segments.

The company has witnessed a notable reduction in volume at the Videotron retail outlets and delays in client migration to its new Helix home entertainment and management platform. There also has been lower advertising revenues, a decrease of sporting events broadcast by the TVA Sports channel, and reduced film and audiovisual content activity in the Media segment.

Its Telecom and Media segments remained solid during the quarter. It recorded a growth of 12,000 illico and 9,000 broadband customers during the quarter.

Dividends

Quebecor is a Canadian Dividend Aristocrat. It sports an average dividend yield of 2.6% and a low payout ratio of ~37%. The company has raised its dividends by a ~23% CAGR over the past decade. Its last dividend hike was nearly 78%. Quebecor also repurchased 1.1 million of its shares.

It repurchased a total of more than 35 million shares in the last nine years. Quebecor is targeting to gradually increase its dividends to 30%-50% of net free cash flows within two years. Stable and resilient cash flow generation and a strong business model should help the company keep growing its dividend stream.

The COVID-19 crisis could have an adverse impact on the growth of Quebecor’s operating results and cash flows over the short as well as medium terms. However, as an integrated communications company, Quebecor will benefit from the huge surge in demand for data and advanced communication solutions in the long term. Its networks remain resilient to cope with the significant increase in traffic and demand.

Strong customer focus, a broad range of diversified and innovative products, and fast and reliable connections have enabled Quebecor to retain a leading market share position in its core markets. Videotron continues to expand its network to cover growing numbers of customers in all regions of Quebec.

Competition

Quebecor competes with other media and communications giants like BCE, Telus, Rogers Communications, Shaw Communications, and Cogeco Inc. in Canada. The company faces intense competition in mobile and cable telephony, Internet access, cable television and OTT video markets.

Bell Canada Enterprises is Canada’s largest communication company with over 22 million customer connections, while Telus Corporation is the second-largest telecom company in Canada, and Rogers Communication, Inc. is a diversified communication and media company. Shaw Communication is Canada’s leading network company.

TickerKeyTickerCompanySectorIndustryScoreQuoteMarket CapP/EFPEEPSYield RawYieldPayoutRatioPaymentsDividendChowderGrowthRatingIncomeRatingTollboothAmbassadorAchieverAristocratKingCountryGraph
TSE:BCEBCEBCECommunication ServicesTelecommunication Services0.6155.2639.3321.9221.922.520.06036.031.321443.330.111368Tollbooth - RegulatedNOYESYESNOCanada1
TSE:TTTelusCommunication ServicesTelecommunication Services0.6026.5526.8625.3225.321.050.04694.691.185541.250.116677Tollbooth - RegulatedNOYESYESNOCanada1
TSE:RCI.BRCI.BRogersCommunication ServicesTelecommunication Services0.4360.8524.2719.1619.163.180.03293.290.628942.000.046624Tollbooth - RegulatedNONONONOCanada1
TSE:SJR.BSJR.BShaw CommunicationsCommunication ServicesTelecommunication Services0.4922.959.3617.4117.411.320.05165.160.8977121.190.051625Tollbooth - RegulatedNONONONOCanada1
TSE:QBR.BQBR.BQuebecor Inc.Communication ServicesTelecommunication Services0.5932.358.0414.6414.642.210.02472.470.362040.800.252864Tollbooth - RegulatedNONOYESNOCanada1
TSE:CCACCACogeco Cable IncCommunication ServicesTelecommunication Services0.6698.294.7112.8212.827.670.02362.360.302542.320.127877Tollbooth - RegulatedYESYESYESNOCanada1
TSE:CGOCGOCogecoCommunication ServicesTelecommunication Services0.7080.661.1610.1010.107.980.02362.360.238141.900.157477Tollbooth - RegulatedYESYESYESNOCanada1

Bottom Line

Quebecor is giving a tough fight to the Canadian Big Three. It was recently added to the Canadian Dividend Aristocrat list raising dividends by a whopping 78%. Quebecor stands a good chance to gain from the secular growth in the communications services sector which is defensive in nature.

It has also established itself as a leader in the creation of French-language content in Quebec.

A Winning Investment Strategy

My portfolio is generating over 12% annual returns since 2009. It's not from the beginning of the year or from 2019, it's from 2009 !!! That's a consistent return which means using the rule of 72, I double my portfolio every 6 years.

My approach is simple but you need key data that I have cultivated with the Dividend Snapshot Screeners. No other investment services provide you with easy to understand data but also actionable data. No hidden magic.

In fact, I have tried all of the investment services for dividend investors like a crash test dummy of investment services. Just ask me, and you'll learn why there was nothing I could use out there and that's how the Dividend Snapshot Screeners were borned!

Join 90,000+ Monthly Investors & Build a Winning Portfolio

DISCLOSURE: Please note that I may have a position in one or many of the holdings listed. For a complete list of my holdings, please see my Dividend Portfolio.

DISCLAIMER: Please note that this blog post represents my opinion and not an advice/recommendation. I am not a financial adviser, I am not qualified to give financial advice. Before you buy any stocks/funds consult with a qualified financial planner. Make your investment decisions at your own risk – see my full disclaimer for more details.