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Summary
- 5G technology is inevitable for emerging technologies like Internet of Things (IoT) to allow smart devices to communicate with each other.
- The TSX capped communication index has risen by 18 per cent in the last one year.
- For growth investors, 5G technology stocks are a must for their portfolio.
Canada witnessed the roll out of fifth generation (5G) technology last year. As a growth investor, 5G telecom/wireless service providers should be on your watchlist.
We already saw, how Coronavirus/Covid-19 pandemic delayed the rate of progress and dampened the adoption of 5G wireless.
With the threat of new South African (B.1.351) and U.K. (B.1.1.7) variant of the coronavirus, back-to-back lockdowns were imposed in Canada and the possibility of another shut down cannot be ruled out.
Under these circumstances, growth investors need patience to deal with market volatilities.
However, there’s a high level of industry and market optimism surrounding 5G stocks. Let's take a look at the four 5G stocks that can play crucial role in the coming medium to long term scenario once the pandemic related obstacles are gone.
Rogers Communications Inc (TSX: RCI.B)
Rogers is the largest wireless service provider in Canada and occupies one-third of total Canadian market share. Its wireless business sales accounted for 60 per cent in 2020.
In one of the biggest deals in the Canadian telecom sector, Rogers acquired rival Shaw Communications Inc. for C$26 billion on Monday, March 15, 2021.
Though the last one-year return on stock price has been 14.81 per cent the company continues to exhibit a strong balance sheet despite Covid-posed challenges.
Free cash flow went up by 14 per cent, to C$ 568 million maintaining a strong liquidity of C$5.7 billion in the declared financial results of Q4 2020.
The overall revenue for the year 2020 is C$ 13.9 billion, down eight per cent year-over-year.
Rogers paid quarterly dividend of C$ 0.5 per share.
Nonetheless, Rogers Communications has seen a significant growth in its subscriber base for almost all its services and is poised to bounce back once the Convid-19 impact subsides by late 2021.
SIERRA Wireless (TSX:SSW)
SierraWireless has been around for more than two and a half decades and is a provider of device-to-cloud and end-to-end IoT solutions. The world's first 5G machine-to-machine (M2M) module and multi-network 5G vehicle router are few names in the list of innovative product offerings of Sierra Wireless.
The company saw an improved revenue growth of 6.3 per cent to US$ 120.5 million in the fourth quarter of 2020, ended December 31.
For the year ended December 31, 2020, gross revenue for the wireless technology provider plunged by 18 per cent to US$448.6 million due to Covid-19 pandemic.
While the company suffered a net loss of US$ 70.2 million the adjusted EBITDA was a negative US$ 34.9 million compared to US$ 9.8 million of 2019.
With economic recovery in place, the year 2021 will be important to watch out for this technology equipment provider.
The stock price increased by ~133.26 per cent over the past one year and by 13 per cent year-to-date.
TELUS Corporation (TSX:T)
The Vancouver-based Canadian telecom giant has ~30 per cent market share with nine million mobile phone subscribers. Apart from mobile telephony services it also provides data, television and landline services in the provinces of British Columbia and Alberta.
In June 2020, the company launched 5G network in Vancouver, Montreal, Calgary, Edmonton and the Greater Toronto Area.
The stock yielded 12.16 per cent returns in the last 12 months.
The gross operating revenue for the year 2020, is US$15.4 billion, up 5.5 per cent YoY.
With the acquisition of artificial intelligence-based data firm Lionbridge AI, the year 2021 for Telus Corporation looks optimistic.
Bell Canada (TSX:BCE)
BCE provides wireless broadband television and landline services in Canada and occupies almost 30 per cent of the Canadian market making it one of the three largest wireless carriers in the country.
For those looking to invest in 5G stocks along with high dividend yield, BCE should be in their must watch list.
The 6.2 per cent yield on dividends (5.1 per cent target for 2021) along with the prospects of mass adoption of 5G technology both by retail and business consumers are clear indications off a positive outlook in 2021 for this behemoth sized Canadian telecom company.
Bottomline
The 5G technology is inevitable for sectors like virtual healthcare delivery, environment and agriculture. With the Canadian government's commitment to spend more on healthcare delivery infrastructure, for any growth investor these 5G companies must be watched closely.
