Anheuser-Busch InBev NV (ADR) (BUD), Rogers Communications Inc. (USA) (RCI): Good Luck Getting a 10% Return From Your Bond Fund!

Quadruple Play

Another low-risk stock with plenty of long-term upside is Rogers Communications Inc. (USA) (NYSE:RCI). The Toronto-based company is Canada’s largest wireless carrier with more than 9 million subscribers. They are the second largest cable company in the country and also own several media assets. The company has high investment grade credit ratings thanks to the ability to offer phone, internet, cable, and wireless in a highly concentrated market. The result is steady growth, good dividend payments, and a stock well positioned to move higher.

The stock is ripe for patient accounts to swoop in following a more than 20% pullback. First, rising rates puts competitive pressure on dividend paying stocks. This is a viable headwind, but you don’t want to own bonds in a rising rate environment so I think dividend stocks will fare just fine after this near-time bout of selling. Second, Verizon Communications Inc. (NYSE:VZ) just bid $700 million for Wind Mobile in an attempt to enter the Canadian market. The competitive landscape is sure to heat up and wireless accounts for just over half of Roger’s total sales. Still, the company has a 34% market share in Canada and it is still a highly concentrated market with the top four players owning more than a 90% share.

Despite the additional competition, the company is still deserving of wide-moat status. Earnings-per-share are forecast to advance 6% per year. The company pays a 4% dividend that has grown at a 17% CAGR over the last five years. The payout ratio is still under 50%. I wouldn’t expect any permanent compression in the 12 times price-to-earnings multiple given that it is a big discount to Verizon Communications Inc. (NYSE:VZ)’s 18x forward P/E ratio. This stock looks positioned to return 10% annually, of course with years above or below this average, to investors and maybe more if the P/E ratio expands from a fairly depressed level.

The Foolish Bottom Line

Bond funds will be lucky to break-even if rates increase another 100 to 200 basis points and achieve historical averages. At best, they might achieve 2-3% annual returns if rates just inch up over the course of several years. Alternatively, there are wide-moat stocks that can easily achieve 10% annual returns without too much additional risk.

The article Good Luck Getting a 10% Return From Your Bond Fund! originally appeared on Fool.com and is written by Justin Carley.

Justin Carley has no position in any stocks mentioned. The Motley Fool recommends Rogers Communications Inc. (USA) (NYSE:RCI). Justin is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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