Financial Contrast: Telefonica (NYSE:TEF) and TELUS (NYSE:TU)

TELUS (NYSE:TU) and Telefonica (NYSE:TEF) are both large-cap utilities companies, but which is the better business? We will contrast the two businesses based on the strength of their valuation, risk, earnings, dividends, analyst recommendations, institutional ownership and profitability.

Profitability

This table compares TELUS and Telefonica’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
TELUS	4.67%	9.10%	2.59%
Telefonica	-5.88%	8.57%	1.99%

Analyst Ratings

This is a summary of recent ratings and price targets for TELUS and Telefonica, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
TELUS	0	6	1	0	2.14
Telefonica	1	4	0	0	1.80

TELUS presently has a consensus price target of $21.50, suggesting a potential upside of 33.75%. Given TELUS’s stronger consensus rating and higher probable upside, research analysts plainly believe TELUS is more favorable than Telefonica.

Dividends

TELUS pays an annual dividend of $1.21 per share and has a dividend yield of 7.5%. Telefonica pays an annual dividend of $0.25 per share and has a dividend yield of 4.6%. TELUS pays out 263.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Telefonica pays out -52.1% of its earnings in the form of a dividend. TELUS has raised its dividend for 5 consecutive years. TELUS is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Insider & Institutional Ownership

49.4% of TELUS shares are owned by institutional investors. Comparatively, 1.1% of Telefonica shares are owned by institutional investors. 0.1% of TELUS shares are owned by company insiders. Comparatively, 0.0% of Telefonica shares are owned by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.

Earnings and Valuation

This table compares TELUS and Telefonica”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
TELUS	$14.88 billion	1.65	$724.69 million	$0.46	34.95
Telefonica	$40.69 billion	0.75	-$53.02 million	($0.48)	-11.27

TELUS has higher earnings, but lower revenue than Telefonica. Telefonica is trading at a lower price-to-earnings ratio than TELUS, indicating that it is currently the more affordable of the two stocks.

Volatility & Risk

TELUS has a beta of 0.73, suggesting that its stock price is 27% less volatile than the S&P 500. Comparatively, Telefonica has a beta of 0.51, suggesting that its stock price is 49% less volatile than the S&P 500.

Summary

TELUS beats Telefonica on 15 of the 17 factors compared between the two stocks.

About TELUS

TELUS Corporation, together with its subsidiaries, provides a range of telecommunications and information technology products and services in Canada. It operates through Technology Solutions and Digitally-Led Customer Experiences segments. The Technology Solutions segment offers a range of telecommunications products and services; network services; healthcare services; mobile technologies equipment; data services, such as internet protocol; television; hosting, managed information technology, and cloud-based services; software, data management, and data analytics-driven smart food-chain and consumer goods technologies; home and business security; healthcare software and technology solutions; and voice and other telecommunications services, as well as mobile and fixed voice and data telecommunications services and products. The Digitally-Led Customer Experiences segment provides digital customer experience and digital-enablement transformation solutions, including artificial intelligence and content management solutions. The company was formerly known as TELUS Communications Inc. and changed its name to TELUS Corporation in February 2005. TELUS Corporation was incorporated in 1998 and is based in Vancouver, Canada.

About Telefonica

Telefónica, S.A., together with its subsidiaries, provides telecommunications services in Europe and Latin America. The company offers mobile and related services and products, such as mobile voice, value added, mobile data and internet, wholesale, corporate, roaming, fixed wireless, and trunking and paging services. It also provides fixed telecommunication services, including PSTN lines; ISDN accesses; public telephone services; local, domestic, and international long-distance and fixed-to-mobile communications; corporate communications; supplementary value-added services; video telephony; intelligent network; and telephony information services, as well as leases and sells handset equipment and telephony information services. It also provides Internet and broadband multimedia services comprising internet service provider, portal and network, retail and wholesale broadband access, narrowband switched access, security, internet through fibre to the home, and voice over internet protocol services. In addition, the company offers leased line, virtual private network, fibre optics, web hosting and application, managed hosting, content delivery, outsourcing and application, desktop, and system integration and professional services. Further, the company offers wholesale services for telecommunication operators, including domestic interconnection and international wholesale services; leased lines for other operators; and local loop leasing services, as well as bit stream services, wholesale line rental accesses, and leased ducts for other operators' fiber deployment. Additionally, it provides video/TV services; smart connectivity and services, and consumer IoT products; financial and other payment, security, cloud, advertising, big data, and digital experience services; Aura; open gateway, living apps; smart Wi-Fi, Phoenix, NT, Solar 360, and Movistar Home devices. Telefónica, S.A. was incorporated in 1924 and is headquartered in Madrid, Spain.