Love Hate Relationship

cat-dog-fight

Internet, cell phone service, data plans. They all sound like necessities in life in the digital world that we live in. Imagine a day without Facebook. How about a week without getting on Instagram. No YouTube? No way! We love our mobile devices and we’ll pay anything to stay connected all the time, but we hate our service providers.

“God damn Rogers!” “I hate Bell.” “Telus sucks!” “Does anyone get reception with Wind?” These are all phrases that I’ve heard many times over from cellphone subscribers in Canada. There isn’t one cell carrier that any individuals actually likes, but we have to live with it. There’s no competition in the mobile provider space, which means that this oligopoly that exists in Canada, and likewise in other countries as well, will continue making record profits off the backs of its customers.

As consumers we hate them, but as investors, especially those with retirement portfolios, it’s amazing! It’s not to say you should place your entire retirement portfolios into cell phone provider stocks, but it proves a point that companies that provide essential services will always be around.

Value To Owners

The mandate for these companies will be to return value to their shareholders. This remains true for any big successful corporation. We hate them because they are constantly making billions in profits, but we love them as shareholders because they provide us with income. Unfortunately for the general public, 99% of us who hate corporations don’t understand that they are publicly owned and that the 1% of the general public who do understand get a share of the profits by owning their shares.

Here’s a quick look at the run the big three telecoms have enjoyed over the last 10 years.

bell

Bell

rogers

Rogers

telus

Telus

All three have experienced growth of well over 100% over the last 10 years. This includes the dismal 2008 when stocks crashed and eliminated half the values of many stocks.

A Little Goes A Long Way

Many individuals always tell me that all these statistics mean nothing because they could never buy enough stocks to warrant any significant gains. I tend to disagree over this statement because people tend to be short-sighted and don’t understand that even the smallest of investment over a long period of time can grow extremely big if someone is willing to be patient.

What do I really mean by that? Imagine saving your coffee money. Rather than buying a Starbucks latte you actually invest that $3 a day instead. Over the course of the year that’s around $1000 in investment money. Each of these companies listed above have averaged a compound return of over 7% yearly, with dividends of around 4% a year on top. This equates to a return of almost 11% a year. Now invest $1000 over each of those 10 years starting from 2004. What are we at now?

After ten years of saving and investing coffee money it would now be worth $18 561.43. What if you did this for 20 years? Well coffee money is now worth $71 265.14. Now to be honest, $3 dollars a day saving shouldn’t be too hard to accomplish for most people. This isn’t even saving. It’s merely giving up a cup of coffee for perhaps having a home brewed one instead. What if you actually tried to save $10 a day. Where would you be at now? $260 117. Yes, $10 a day invested in one of these companies would put you at a quarter million after 20 years.

Getting It Back

Will it remain that you’ll always get these great return? Probably not. Past performance is never a good gauge for future returns, but these companies have remained stable, they’ve consistently increase dividend payments to their shareholders and they’re monopolies in their field.

But why stop at cell phone companies? A lot of the characteristics that describe Canada’s telecom industry remain true for the top 500 and top 60 companies that make up the indexes for the American and Canadian stock markets. They comprise of big, successful companies that focus on returning value to their shareholders.

brands

If you are already spending your hard earned money buying things from Apple, or buying Kraft dinner, or drinking Coca Cola products, then why not own the companies and pretend that you are paying yourself back with your purchases. People are already so obsessed with getting credit cards that have cash back in their purchases, but this doesn’t help grow your own money. You are merely getting back a portion of the money that you had to spend. If rather, you owned the companies of the products you buy, then you’d be making your investments more profitable too.

Sometimes it makes more sense to love the companies that you do business with rather than hate them. Why fill your heart with all the hatred and stress. “I love Telus!” “Bell is great!” “Rogers helped me retire.” Aren’t those words much more pleasing to say?

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