Pat McKeough responds to many requests from members of his Inner Circle. Every week, his comments and recommendations on the most intriguing questions of the past week go out to all Inner Circle members. And each week, we offer you one of the highlights from these Q&A sessions.

Q: Hi Pat: I am retired, hence primarily an income investor. How do you see the longer-term prospects of Shaw Communications? Is it worth continuing to hold? Thanks.

A: Shaw Communications (symbol SJR.B on Toronto; www.shaw.ca) is one of Canada’s largest cable TV operators. It has 1.9 million basic cable subscribers (mostly in Western Canada), as well as 854,389 satellite customers through its ownership of Shaw Direct. The company also provides high-speed Internet to 1.9 million clients and telephone services to 1.4 million.

In September 2014, Shaw completed its $1.2-billion purchase of Colorado-based ViaWest, a privately held operator of data centres, cloud storage and information technology services. ViaWest has 27 data centres in the western U.S.

In the three months ended February 28, 2015, Shaw’s revenue rose 4.9%, to $1.34 billion from $1.27 billion a year earlier.

Earnings per share fell 26.1%, to $0.34 from $0.46, mostly due to one-time costs related to a restructuring of its customer service call centres that included cutting 1,600 employees. Cash flow per share fell 1.3%, to $0.77 from $0.78.

Dividend yield: Recently raised dividend now yields 4.3%

The company raised its monthly dividend by 7.7% with the March 2015 payment, to $0.09875 from $0.091667. The shares yield a high 4.3% and trade at 15.5 times this year’s expected earnings of $1.77 a share.

Shaw faces strong competition for TV and Internet subscribers, mainly from Telus Corp. It aims to offset slow growth in cable and satellite by reorganizing and cutting costs.

Meanwhile, to grow and diversify, it plans to make more acquisitions, like ViaWest. However, it’s uncertain how successful this strategy will be.

Inner Circle recommendation: HOLD.