The Best Stocks with Monthly Dividends: Shaw Communications

07/01/2020 5:00 am EST


Ben Reynolds

CEO, Sure Dividend

Ben Reynolds, editor of Sure Dividend continues a 5-article countdown of his favorite monthly dividend payers. Shaw Communications (SJR) is number 3 on his list.

Monthly dividend stocks are securities that pay a dividend every month instead of quarterly or annually. More frequent dividend payments mean a smoother income stream for investors.

Our top monthly dividend stocks were selected based on their projected total annual returns over the next five years, but also based on a qualitative assessment of business model strength, future growth potential, and dividend sustainability.

Read about monthly dividend payer #5 — STAG Industrial

Read about monthly dividend payer #4 — Main Street Capital

Third on our countdown is Shaw Communications (SJR), which was founded in 1966 as the Capital Cable Television Company. It has since grown to become Western Canada’s leading content and network provider, catering to both consumers and businesses. The company produces about $4.1 billion USD in annual revenue.

Shaw reported second quarter results on April 9thand reported consolidated revenue increased by 3.7% to $0.97 billion USD. Adjusted EBITDA increased 9.5% year-over-year to $427 million USD. The company added 54,000 customers to the Freedom Mobile segment.

Wireless service revenue increased 19.6% as the customer base grows to over 1.8 million customers. Second-quarter average billing per unit (“ABPU”) grew by 6.8%. Postpaid churn increased for the quarter to 1.6%, primarily attributed to the intensity of aggressive competitive and promotional offers.

Free cash flow increased 20.1% to $136 million USD, due to higher adjusted EBITDA and lower cash taxes and interest. Net income was up 8.4% from last year to $119 million USD for the second quarter of 2020.

Diluted earnings per share were higher this year by 6.7% to $0.23 USD. The company had a leverage ratio of 2.5x after the quarter, which is at the low end of its target range of 2.5x-3.0x.

Shaw withdrew its full-year guidance after reporting second-quarter earnings, but importantly the company maintained its monthly dividend. The company is raising cash to get it through the coronavirus crisis, including a debt raise of $500 million in Canadian dollars.

Shaw currently pays an annualized dividend payout of $1.182 per share in Canadian dollars; in U.S. dollars, the stock has a current annual dividend payout of $0.84 per share. Shaw has a current yield of nearly 5%.

Shaw also has a sustainable dividend payout. Shaw has a defensive business model which should continue to generate sufficient cash flow to pay its dividend, even in a recession, as consumers will still use their wireless and cable service.

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