Recent Buy – Rogers Communications Inc (RCI) (RCI.B)

Rogers Communications Inc
I initiated a new position in Rogers Communications, Inc (NYSE: RCI, TSE: RCI.B). Rogers is a diversified communications and media company and together with BCE Inc and Telus Corp forms The Big-3. Rogers is Canada’s largest provider of wireless and data communications services and also one of the leading providers of cable television, high-speed internet and telephony services.

Corporate Profile (from FinViz):

Rogers Communications Inc. operates as a communications and media company in Canada. The company’s Wireless segment offers voice and high-speed data services, as well mobile devices and accessories. It markets its products and services under the Rogers, Fido, and chatr brands. Its Cable segment offers cable television, high-speed Internet access, and cable telephony services. As at December 31, 2012, this segment had 2.2 million television subscribers; and 1.9 million high-speed Internet subscribers, as well as provided home phone services to approximately 1.1 million customers. It also offers a digital video, including a range of television programming and features, such as HDTV; Internet services with multiple tiers of high-speed broadband. This segment provides its products through stores and e-business Websites. The company’s Business Solutions segment provides wired telephony, data networking, and Internet protocol (IP) services for Canadian businesses and governments, as well as to other telecommunications providers on wholesale basis. This segment offers voice, data, IP, and ethernet solutions to small, medium, and large businesses; governments; and financial institutions, as well as provides a multi-service suite of services over high speed fiber, cable, and wireless network. Its Media segment offers television and radio broadcasting, televised shopping, sports entertainment, publishing, and digital media. It operates 55 radio stations across Canada; various television properties, including the City network, 5 multicultural OMNI stations, Sportsnet, specialty sports television services, and various other specialty channels; nationally televised shopping service, The Shopping Channel; the Toronto Blue Jays Baseball Club; Rogers Centre, a sports and entertainment facility; and approximately 50 consumer magazines, and trade and professional publications. The company was founded in 1920 and is headquartered in Toronto, Canada.

Recent Buy Decision:

My analysis entitled Canadian Telecom Oligopoly Provides Sustainable Dividend Growth delves deeper into the stronghold of The Big-3. Rogers already dominates the wireless market with a market share of approximately 35% of Canada’s wireless subscribers. With the acquisition of MLSE in 2012 and a 12-year broadcast and multimedia deal with NHL in 2013, Rogers has been expanding its media segment extensively, which in-turn provides richer content and support for the company’s cable business. Going forward in 2014, the big news seems to be Rogers preparing to launch an online streaming service that would compete with Netflix (NFLX). Rogers Communications Inc is a component of the S&P/TSX 60 index and has been paying dividends since 2000. Rogers has raised dividends 9 years in a year with a 5-yr dividend growth rate (DGR) of 14.7%.
Yesterday’s fourth quarter results release showed that the profits dropped on a decline in wireless revenue due to lower-priced roaming plans and simplified sharing packages that cut into revenue growth. I am not too concerned with this and see the 5% drop in share price as a buying opportunity, in what is a short-term stumble with Rogers retaining its customers amid falling wireless rate plans across the industry.
Rogers announced that it will be raising its dividends by 5% from an annual dividend of $.174 to $1.83. In addition, Rogers has authorized a renewal of the share buyback program for the purchase of $500M of stock for another one-year period.

Risks:

The biggest risk for Rogers is an entry of new wireless service providers in Canada. The Federal government wants to promote competition and the entry of any new service provider would result in lost market share. This, for now, seems unlikely as Verizon Communications (VZ) and AT&T (T) in 2013 decided not to enter the market seeing that the market could not support a fourth player.
On the cable front, consumers have also started cutting the cord and shedding their cable services to move to online content instead, which could see challenges in Rogers’ cable segment. But this is where Rogers plans to target the consumers with the online streaming service. Rogers, being a cable and internet service provider, already has an advantage and is rumored to promote its own service so that customers do not have to worry about bandwidth caps. This could possibly backfire on Rogers as the industry observers are crying foul and see an antitrust case in the making.
A summary of the stock:

  • Symbol: TSE: RCI.B (also trades at NYSE: RCI)
  • Quote: $43.28
  • 52-week Range: $40.18 – $52.75
  • P/E: 11.93
  • Yield: 4.22% (after yesterday’s dividend increase)
  • 5-yr average yield: 3.4%
  • 5-yr DGR: 14.7%
  • Graham Number: 26.96
  • Chowder Rule: 18.7
Full Disclosure: I am long RCI.B and BCE. My full list of holdings can be found here.

9 thoughts on “Recent Buy – Rogers Communications Inc (RCI) (RCI.B)

  1. You’ve been talking about the Canadian telecom oligopoly for some time. It’s good you’re continuing to add. I don’t often hear you talk about Telus. Are they the weaker of the three? As you know I’m a strong believer in the “rule of two”?
    -Bryan

    • Hi Bryan,
      The Rogers position is new to my portfolio. I only had BCE so far and had my eye on Rogers for while and yesterday’s 5% drop was the opportunity I was looking for.
      Telus is also a great long term play and the smallest of The Big-3. Between the 3, BCE and Rogers have the best record and have the great future prospects as they are expanding aggressively in the media sector. I will have to revisit Telus sometime in the future, but for now its just BCE and Rogers in my portfolio.
      Im not sure I know what you mean by “rule of two”. Care to elaborate?

      regards

    • Sure. The idea of the Rule of Two is that there is enough room in most product markets for two companies to grow and prosper. Someone starts having trouble when you get to 3,4,5. Think about Coke and Pepsi, or Home Depot and Lowes, AT&T and Verizon. I’m sure you have good Canadian examples.

      I contend that one reason that particular sectors are reduced to chronic bankruptcys (like auto manufactures, airlines, cpu hardware manufacturers, etc) is because they are really just a commodity business. Which puts downward pressure on profits. Just wait until AT&T and Verizon report year end numbers for this year. Their growth will have stalled and their profits fallen. It’s a price war……great for the consumer…..horrible for the company.

      I’m sorry for the lengthy answer buddy

  2. Hi R2R,

    from the telecommunications-companies I only trust Vodafone, AT&T and Verizon.
    The biggest companies on the world.

    I don´t trust the “Deutsche Telekom” in Germany and others from the EU!
    And Canada? Ok Canada is like the USA – similar…
    But I don´t know…
    I like BIG COMPANIES – and then I can sleep well 😉

    Keep going on YAKEZIE! 🙂

    Best regards
    D-S

    • Hi D-S,
      I like the big ones too, that have a track record. I am quite familiar with the Canadian market, so I am comfortable investing in them.
      I would like to hold one more telecom stock in the future – probably in the US and I like Verizon more than AT&T…so, I will be looking into that later. For now, I am back to building my cash positions.

      Looks like you are climbing on Yakezie already. My ranking dropped by 40,000 after I joined. No idea what happened…just makes my goal that much harder now 🙂

      regards

    • You are right…I climbed back up again after the down on the first couple days after signup.

      I think its a good idea to not be obsessed with it and not pay close attention to it on a day by day basis.

      regards

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