The Weekly Lineup: Telecom Turnaround and Thinking about REITs

The Telecom Turnaround

courtesy of www.telus.com

courtesy of www.telus.com

In mid June, there were fears of U.S. telecom giant Verizon (VZ) moving into the Canadian market. On Tuesday June 25th and Wednesday June 26th, panic selling kicked in on all three Canadian telecoms. Over the two-day sell-off, Telus was down over -10.6% closing below $30 per share, and Rogers Communications was down -12%. Bell (BCE) fared much better, only off about -4.0% for the two days. I felt this sell-off was completely overblown. I also felt this was a great opportunity to initiate a position in Telus Corp. (T).

I already had a position in Rogers Communications. So back on Wednesday June 26th I purchased 65 shares of Telus Corp. at $30.50 per share. Telus was a company I had wanted to add to my portfolio for some time, so when everyone else was lining up at the door to sell, I was more than happy to buy. I covered The Canadian Telecoms back in September 2011 for DSO. I found Telus to have the best fundamentals of the three Canadian telecoms.  It was also one of my 2012 Canadian Stock Picks.

Even if Verizon did enter the Canadian market they would either have to invest in massive infrastructure costs, or buy out one of the smaller players such as Wind Mobile and Mobilicity. In light of the Canadian Government’s record on foreign takeovers, although they said otherwise, this was likely to be difficult for Verizon. There were also other factors.

This strategy proved to be the right move, when Verizon announced last week they would not be interested in entering the Canadian market. Be greedy when others are fearful. ;)

Thinking about REITs

Dividend Mantra discussed his recent buy of more shares in Realty Income Corp. this week.  I’ve been thinking about REITs (Real Estate Investment Trusts) for a while now, especially with their price declines over the last few months.  However, REITs may be currently discounted for a reason. Keep in mind any rise in interest rates, whenever that may be, will impact the operational costs and bottom line for REITs. That’s one of the risks moving forward.

I have never been a fan of REITs. Back in the late 80’s to mid 90’s, I worked as a junior draughtsman in the construction industry. I saw first-hand the meltdown in the commercial real-estate sector as the 90’s recession began. This hit both large retail malls as well as many office buildings, and caused a plummet in real estate investments.  As a result, I did not invest in REITs when I started my dividend journey back in 2009.

However, I do want to top-up my TFSA and contribute to my RRSP in January. REITs interest me at these price levels. So I may consider entering a position into RioCan Real Estate Investment (REI.UN), with the understanding there is risk involved, and potential for more price declines. I’m also considering going the ETF route, with iShares Capped REIT Index Fund (XRE). RioCan comprises about 19% of XRE, so I’d probably prefer to buy RioCan directly.

The Weekly Lineup

Here are some great articles I’ve been reading this week:

In my last post Hello AWeber, Bye Bye FeedBurner, I discussed my migration away from FeedBurner. Here is an interesting post written back in March on the same topic. Another blogger gives his synopsis in, Let’s Say FeedBurner Shuts Down.

On the dividend front, Dan Mac continues his monthly summaries with Notable Dividend Increases: August 2013.

Over at A Wealth of Common Sense, Ben wrote an interesting post on three Warren Buffett quotes, from an indexing point of view, in Advice from Warren Buffett Circa 1975. You can’t go wrong when you mention the oracle. ;)

Rob L. had an interesting guest post over on My Own Advisor, titled So, when are stocks on sale?
I thought this was an interesting way to look at stocks being discounted, with three strategies given.

What are your thoughts? Do you like Telus and the telecoms? Are you interested in REITs?

Have a nice weekend everyone! :)

Disclaimer: I am long on Telus (T), Rogers Communications (RCI.B), and interested in RioCan (REI.UN).

19 Responses to “The Weekly Lineup: Telecom Turnaround and Thinking about REITs”

  1. Ben

    Sep 07. 2013

    Good work on the Telus purchase. Investors seem to sell first and ask questions later when uncertainty is involved.

    REITs were one of the best performing asset classes from 2010-2012, so they were definitely due for a fall. Now that they’ve been beaten down a bit they might be due for a look. But I agree that commercial real estate can go through difficult periods and rising rates are a headwind.

    Thanks for the mention.

    • The Dividend Ninja

      Sep 07. 2013

      Hi Ben, thanks!

      I meant to write a post on Telus much earlier. By the time I was going to write, Verizon was already pulling out of any Canadian plans. They have a large enough market at home in the U.S. ;)

      REITs eh? To buy or not to buy, that is the question. My hunch is there will be plenty of opportunities moving forward.

      Cheers

  2. My Own Advisor

    Sep 07. 2013

    You’re a smart man thinking about REITs. I own REI.UN, HR.UN and a few others. If I can save more money this summer and fall, I will buy more.

    Thanks for the mention my friend!

    Mark

    • The Dividend Ninja

      Sep 07. 2013

      Mark

      I agree about REITs being a good entry point! As I said to Mantra interest rates are the big wild card here. Nonetheless, I’ll have to look at RioCan and H&R in more detail. It might make more sense to buy both or go the ETF route. ;)

      All the best,
      Cheers

  3. Nice purchase of Telus! I added to my position at $30.69 – on the same day as you! (26 Jun)

    Have you considered ZRE over XRE? It has more holdings (18 vs 15) that are much more evenly distributed. It seems to me if I was going to pay 0.55%, I would prefer ZRE and get a more balanced exposure.

    • The Dividend Ninja

      Sep 07. 2013

      Hey CDB,

      Thanx for dropping by! YES Telus was a good move IMO. Check out that Telecom article I wrote for DSO (link in the article). It will confirm you made a good buy. :)

      I haven’t considered ZRE, I will definitely look into it! Thank you.

      Cheers

  4. Dividend Mantra

    Sep 07. 2013

    Ninja,

    Great move on TU! I remember you talking about that a while back. Nice going. :)

    Thanks for including me! REITs still have some headwinds with interest rates on the rise, but overall I think today’s prices represent good values to get exposure to real estate after the big drop. Some have dropped by 40% or more. If I already had significant exposure to real estate I might wait and see what happens, but even after all of my purchases I’m still only at 5% for my RE exposure. So, if the prices go down from here I can continue to average down. Before May of this year I had 0% exposure to real estate because I felt the prices on many REITs were crazy (and rightly so).

    Hope you’re having a great weekend!

    Best wishes.

    • The Dividend Ninja

      Sep 07. 2013

      Mantra, thanx!

      If there is anything I’ve learned over the last two years it is to look where others are fearful and selling. As long as you have the stomach and can hold for the long-term, that strategy will really pay off.

      I also think REITs are great value right now. Interest rates are the big wild card here, but REITs in Canada like RioCan and H&R REIT, are big and established. They’ll be just fine over the long term.

      Resource stocks and REITs really interest me right now. I just don’t have new capital to invest unfortunately. ;)

      All the best, and keep up the great work on Dividend Mantra!!

      Cheers

      • Rob aka Mr BTSX

        Sep 08. 2013

        yeah understand that one, too many great stocks not enough cash:)

        • The Dividend Ninja

          Sep 08. 2013

          I think that is always a problem, or not wanting to sell what I already have invested. ;)

  5. Rob aka Mr BTSX

    Sep 08. 2013

    As mentioned in a previous comment, it was comments in a Greater Fool post that alerted me to the sel loff in the REIT sector (remember buy when others are selling) I googled CDN RIETS and found a list of them on wikipedia and looked at each one individually. I looked at business model and where possible FFO and AFFO (passed on Partner for that one) while I don’t have a crystal ball I felt comfortable enough to buy

    True North Apartments
    Dundee International (Europe/German exposure)
    Artis (industrial)

    As well added some to more to Aberdeen Asia Pacific (closed end MF) for international bond exposure.

    I bought this as long term buy and holds, so further price declines won’t bother me.

    • The Dividend Ninja

      Sep 08. 2013

      Rob,

      I’m more conservative, I would like to stick with the bigger players such as H&R REIT and RioCan, or just go the ETF route. If you invest in the smaller REITs, yes there is more potential for returns, but also a lot more volatility – just my thoughts. ;)

      Cheers

  6. farcodev

    Sep 10. 2013

    Class post as usual DN :)

    I’m not interested by any telco for some reasons but have a REIT (AAR.UN) that I hold for long-haul revenue.

    • farcodev

      Sep 10. 2013

      It is of course beaten up, and RIP its CEO recently too, but it is a good value play in my spreadsheet.

    • The Dividend Ninja

      Sep 13. 2013

      Farcodev,

      Not sure why you wouldn’t want to buy any telecoms, these are great solid dividend payers. AAR (Pure Industrial REIT) looks a little too small-cap and riskier for my taste. I would prefer the big established REITs like RioCan and H&R REIT – I can sleep at night holding those guys. You’ll need to keep your eye on AAR for sure.

      Cheers

      • farcodev

        Sep 14. 2013

        I don’t want them for ideological reasons and because they are all overvalued according to my valuation spreadsheet, as solid as they appear to be.
        AAR is indeed small but has a good value and is my first but not the unique/last REIT I buy, and RioCan is on my list.

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