Investors looking for consistent and meaningful long-term returns have often turned to the telecommunications sector. Indeed, finding the right telecom stock is not easy. However, in this age of rock bottom bond yields, getting similar, if not better, returns from a company with a strong, long-term outlook seems like a good deal to me.
One of the best options for investors looking for a blue chip Canadian telecommunications stock is Rogers Communications (TSX: RCI.B) (NYSE: RCI). Here’s why I think investors should consider this action now.
Analysts like this telecoms title
There are a lot of advantages to be had with Rogers shares in regards to its upcoming merger with Shaw Communications (TSX: SJR.B) (NYSE: SJR). Indeed, this mega-merger represents a continuous consolidation in the telecommunications sector. Like many industries, Rogers is a telecommunications security that benefits from an increase in scale over time.
Rogers expects to be able to double its wireless footprint nationwide with this agreement. Additionally, this stock is likely to get stuck around its current levels until the merger is completed (or not). Therefore, investors who capitalize on the synergies and value that can be created due to scale may have an intriguing entry point here.
This acquisition is expected to be finalized in the second quarter of next year, assuming any regulatory hurdles can be managed along the way. Some assignments are probable. However, Rogers believes this deal can deliver great benefits over time.
The company’s analysts’ average price target of $ 72 per share at the time of writing this represents a significant rise from here. Indeed, I tend to side with the analysts on Rogers stocks and see this as great long-term holdings at a reasonable price right now.
At the end of the line
The Rogers-Shaw deal is a huge combination of $ 28 billion, including debt. Therefore, this transaction remains subject to various regulatory approvals. There is still a significant risk to bet on this security one way or the other at this time.
Currently, the Canadian Radio-television and Telecommunications Commission (CRTC) and the Competition Bureau are responsible for reviewing this agreement. The CRTC is responsible for reviewing license transfers.
In addition, the Ministry of Innovation and Science deals with spectrum transfer – licenses to transmit wireless services. In addition, other government departments are examining competition concerns related to this agreement.
Therefore, there are a number of services that Rogers will need to satisfy in the short term.
Having said that, I think Rogers remains undervalued relative to its long-term total return outlook. This is a telecommunications stock with a fantastic history of excellent dividend income and capital appreciation over time. Nothing has changed on that side.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We are straight! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer, so we post sometimes articles that may not conform to recommendations, rankings or other content.
Foolish contributor Chris MacDonald has no position on the stocks mentioned. The Motley Fool recommends ROGERS COMMUNICATIONS INC. CL B NV.