When it comes to investing in high quality Canadian stocks in telecommunications, there are only a handful of choices for Canadian investors. The market is dominated by the Big Three, while Shaw Communications (TSE:SJR.B) and Quebecor (TSE:QBR.B) are what we consider to be the only two legitimate challengers to this dominance.

Now that Rogers Communications (TSE:RCI.B) is effectively buying out Shaw, that leaves Canadian investors looking to buy stocks with four main options in the space. Heading into third quarter results earnings season, analysts at the Royal Bank of Canada (TSE:RY) gave the telecom industry a positive view.

Telus (TSX:T) makes top pick in telecoms 

The positive tone is notable as since March of 2020, these same analysts have been neutral on the sector in general. RBC now believes that telecoms will exit 2021 and enter 2020 with a more robust earnings recovery on the back of “the beginning of a multiyear recovery in the Canadian wireless market with direct COVID-19 impacts in the rear view mirror.”

It estimates that the industry can return to 7-9% annual Net Asset Value (NAV) growth and that they will see modest but steady growth in wireline and sequentially stronger media performance.

The top pick in the industry belongs to none other than Telus. This is a view we’ve long shared at Stocktrades. Telus has outperformed its Big Three peers over the past one, three, five, and ten year periods.

Outside of Quebecor which has trounced the big three in terms of growth, Telus has been the most consistent and has grown revenue at a 5% clip over the past handful of years. In comparison, BCE and Rogers have only averaged 1.25% and 0.74% annual revenue growth over the same period.

Looking forward, Telus is expected to post mid-to-high single digit growth rates and analysts have a one-year price target of $30.41 per share. This implies ~10% upside from today’s price.

According to RBC “there is no other company in our coverage that has as many potential sources of upside to our NAV than Telus". They list broader FTTH coverage, lower churn, and enhanced CAPEX flexibility heading into Fiscal 2023 as key benefits of its $1.5B accelerated 2021-2022 capital program.

Telus (TSX:T) accessing sub-industries

Furthermore, it highlights Telus Agriculture and Telus Health as well positioned to grow margins. One of the most overlooked aspects of Telus is the company’s exposure to sub-industries like agriculture and telehealth.

Much like they did with Telus International, it would not surprise me if the company unlocked this value by spinning out these two as separate, publicly-traded entities down the road.

Finally, it is worth noting that Telus is a Canadian Dividend Aristocrat that has achieved 17-years of consecutive annual dividend growth. This is the longest streak among its peers and the 5YR annual rate of 7.1% is 200 basis points higher than that of BCE. Rogers went through a period of dividend stagnation and lost its Aristocrat status a number of years ago and is no longer considered a premium dividend growth stock.

The good news? Telus is expected to maintain this pace of dividend growth (7-10%) through the end of 2022. The company usually announces its dividend growth targets in three-year periods, so investors should get insight into future dividend growth expectations once this current three-year period is close to an end.

Moving on lets look at how Canadian National Railway (TSX:CNR) maintains a strong economic moat despite recent challenges.