May 25, 2022

Shaw Communications Inc (SJR/B)


Shaw Communications Inc (SJR/B) is at its heart a Western Canadian cable and satellite TV company (founded in 1966) that has rapidly been trying to diversify in order to compete with the other three major Canadian telecoms (Telus Corporation (T), BCE Inc. (BCE) and Rogers Communications (RCI/B).  Its recent forays into high-speed internet access and wireless communications have seen varying degrees of success.  Shaw’s most recent financial report shows a 29% increase in revenues over the same time period from 2010.  This is by far the sharpest increase in revenues out of the major telecoms and is due in large part to the acquisition of the Canwest Global family of TV networks, and increased digital cable subscribers.  It serves more than 3.4 million customers and boasts over 625,000 kilometres of fibre-optic cable laid.  Their satellite TV division reaches almost a million homes across Canada.


Shaw logoUpcoming Opportunities and Dangers:


The main difference between Shaw Communications (SJR/B) and the other “Big Four” Canadian telecoms is its specialization in the Cable and Satellite TV sectors.  It has around 60% of the market share in this area and a very solid market base in Western Canada (that was only strengthened by the purchase of the Winnipeg-based Canwest Global franchise).  For the short term at least, it appears that this characteristic will be a major competitive advantage.  The logic behind this assertion is that advertisers have begun pouring money back into the networks’ pockets and consequently television providers have seen their revenues and profits increase.  This has obviously been a boon to Shaw Communications (SJR/B) and their new division Shaw Media (the former Canwest Global) and their 19 speciality channels.


The increased competition in the wireless data and phone industries have left the other “Big Four” telecoms vulnerable where Shaw is not because of their very limited exposure.  They have invested some money in exploring different wireless opportunities, but with the state of the current marketplace my guess is that they will be highly selective on where they choose to engage their competitors.  I recently read a report put forth by TD bank that stated the following:


U.S. cable stocks have enjoyed a healthy recovery over the past six months, and TD Newcrest believes it’s a harbinger of what’s to come in the Canadian sector.


Despite declines in a key metric known as RGU, or revenue generating unit, U.S. cable valuations have rebounded and benchmark names Comcast and Time Warner Cable are now trading above six times earnings before interest, taxes, depreciation and amortization. That’s higher than telecom stocks AT&T and Verizon, TD analyst Vince Valentini points out in a report today.


By comparison, Canadian cable stocks are now trading at lower multiples than BCE Inc. and Telus Corp. – something Mr. Valentini believes won’t stick around for long.


“We expect a relative rally in Canadian cable stocks versus telco stocks over the next six months,” he wrote in a semi-annual review of the sector published today.


This makes a lot of sense, and with Shaw having a disproportionate stake in the cable industries relative to its competitors, it stands to benefit them most.


Shaw (SJR/B) has also recently benefited from its increased digital cable subscribers because the service is more expensive than basic cable and offers many more up-sells such as pay-per-view options.  This digital infrastructure could help them greatly in the future as a means of packaging other telecommunications services.


Finally, Shaw Communications (SJR/B) has recently focused on streamlining its organizational structure and consequently let go of 550 employees.  According to Shaw this is estimated to save the company over 50 million dollars.  Shaw CEO Brad Shaw had this to say on the matter, “Our industry is transforming and competition in our core business continues. We have taken decisive and immediate steps to streamline our organizational structure. In this changing landscape managing costs and operating efficiently are essential.”  Most analysts seen this as a positive long-term move that was necessary to compete with Telus (T), Rogers Communications (RCI/B), and BCE Inc (BCE).


Shaw has recently become a favourite of experts due to its advantageous position in the telecom industry and its 73.94% dividend growth over the last 5 years.  Personally, I think that wireless data is going to become a much more important aspect of the telecommunications game (albeit more competitive as well) and Shaw is the furthest behind in this field by a large margin.  This may hurt its overall appeal in the future.  That being said, it is obviously a great company with a strong balance sheet and an attractive dividend.  People looking for low-risk, income-producing equities could do a lot worse than Shaw Communications (SJR/B).



SJR/B Canadian Dividend Stock Graph


SJR/B Canadian Dividend Stock Metrics

TickerNamePriceDividend YieldPayout RatioDEBT_TO_MKT_CAPDividend Growth 5 yearsDividend Growth 1 years
SJR/BShaw Communications Inc204.669.850.420384832.249274.705787



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