Forget Ted Lasso. Canada’s latest corporate family drama has become the next frenzy of media event.
This is the story of Edward Rogers, son of the founder of the Rogers Communication Inc. (RCI) empire, Ted Rogers, who seeks to take control of the company’s board of directors.
In a shocking twist, family matriarch Loretta Rogers is withdrawing her support for the attempted coup, claiming she was misled by her ambitious son.
As the saga unfolds in the courtroom, the real situation becomes too real for the millions of average Canadians (myself included) who hold RCI shares in their retirement portfolios and rely on the success of the giant. telecommunications to help them reach their golden goal. years.
According to Bloomberg data, 65% of Rogers shares are owned by clients through their investment advisers. Some of the largest institutional shareholders in the company are mutual fund companies and pension funds. Most Canadians save for retirement through mutual funds and company pension plans. The bottom line: If you’re investing for retirement, you probably own RCI Class B shares directly or indirectly.
Rogers has become a fixture in Canadian retirement portfolios primarily because it is part of a telecommunications oligopoly, which includes Telus Corp. and BCE Inc. (which owns BNN Bloomberg through Bell Media).
Telecommunications companies, like Canada’s big bank oligopoly, must adhere to strict government regulations that include restrictions on foreign ownership, but ultimately protect profits.
This earnings protection normally gives shareholders the luxury of a relatively stable stock price and relatively generous dividend payouts.
Rogers Communications is also a favorite for investment advisers and Canadian equity fund managers simply because there are few alternatives for retirement investors who rely on steady earnings growth and reliable sources of income. Dividends from oligopolies have become a substitute for fixed income for over a decade as yields on government bonds and guaranteed investment certificates languish well below inflation.
But dividend income is not the same as fixed income, and this is where the Rogers drama becomes real for retail investors. Dividend payments are at the discretion of the Company and the price of the underlying stock fluctuates with the market.
RCI’s shares, which have been plummeting of late, have lost nearly ten percent of their value as this month’s drama unfolded. Most long-term investors can rule this out, but the future of the stock is in question as executives focus their attention on a battle to control the company.
With the uncertainty surrounding the company’s planned $ 20 billion purchase of Shaw Communications Inc. and rising legal fees, RCI’s dividend yield – currently around 3.5% p.a. – could also be put under pressure.
This is another rung on the risk ladder for the growing number of Canadian employer pension plans moving to market-driven defined contribution pension plans instead of payout defined benefit plans. guaranteed.
Much of the disconnect between the corporate elites and RCI regular shareholders can no doubt be attributed to the two-class share structure enjoyed by the Rogers family.
Rogers Communications issues different classes of common shares which generally confer disproportionate voting rights. The Rogers family trusts nearly 98% of Class A voting shares and 9.89% of Class B common shares, which pay dividends but do not have voting rights. Family members also occupy a disproportionate share of board seats.
The two-tiered equity structure is a throwback to the old days of Canadian history, when financial power was more consolidated and nepotism was seen as a strength and not the value-destroying ritual that it really is.
For Canadians investing for retirement, the wealthy playing power games with everyone’s livelihoods are just another risk to consider.