Investors are weighing whether to invest in TELUS (TSX:T) stock at its current price of $16.41 per share. The Canadian telecom company is experiencing a notable dividend yield of approximately 10.2%. This yield attracts income-focused investors yet raises concerns about the sustainability of the dividend.
Current Dividend Profile
TELUS’s dividend profile has become a focal point of market skepticism. The payout ratio was about 69% of free cash flow in 2025, benefiting from non-core asset sales. Without these sales, the situation appears more precarious. In 2024, the payout ratio surged to roughly 107%, and by 2025, it hit an alarming 146% based on net income. This trend opens the possibility of a dividend cut.
However, even a 50% reduction in the dividend would still provide investors with a robust yield of around 5.1%. This remains significantly higher than the broader Canadian market average of about 2.3%, making the investment still appealing.
Leadership Changes as a Catalyst for Growth
A significant change involves the appointment of Victor Dodig as the new CEO, effective July 1. Dodig, known for his transformative leadership at CIBC, led the bank to an impressive turnaround. His strategies may include asset sales, enhanced cost management, and potential adjustments to the dividend structure.
Financial Health and Outlook
TELUS’s credit rating has decreased from BBB+ in 2021 to BBB-, highlighting the urgent need for balance sheet improvement. Asset divestitures may be on the table, particularly involving TELUS International and TELUS Agriculture, as these segments are grappling with challenges.
Core Business Strength
Despite these headwinds, TELUS’s core operations exhibit resilience. The company added over one million customers for the fourth consecutive year, showing strong loyalty in its postpaid mobile sector. Additionally, adjusted EBITDA grew by 3.1%, suggesting underlying stability in its business model.
Investment Potential
From a valuation perspective, TELUS currently trades at about a 20% discount to the analyst consensus price target, indicating a potential upside of nearly 26%. This discount reflects current market uncertainties while simultaneously presenting an opportunity for long-term investors.
- Current share price: $16.41
- Dividend yield: ~10.2%
- 2025 payout ratio: 146% (net income)
- CEO appointment: Victor Dodig on July 1
- Customer additions: Over 1 million for four straight years
In conclusion, while TELUS faces challenges regarding its dividend sustainability and balance sheet, much of this risk appears factored into the stock price. With a new strategic leader and the potential for asset sales, TELUS presents a credible turnaround opportunity. Long-term investors, particularly those prepared for volatility, may find this stock an attractive option for income and capital appreciation.
