Telus Corp. announced a significant change in its financial strategy on Wednesday, revealing it will pause dividend growth. This decision is intended to align the company’s dividends with its share price and overall growth prospects.
Dividend Hike Suspension Details
The announcement followed a decline in Telus’s stock price, which closed at $18.27 on the Toronto Stock Exchange. Year-to-date, the stock has decreased by 6.9 percent and has fallen 17 percent compared to last year. Concerns regarding Telus’s debt levels contributed to this downturn.
Previous Growth Plans
- In May, Telus reduced its dividend growth target to between 3 percent and 8 percent annually from 2026 to 2028.
- The most recent quarterly dividend remains at $0.41 per share.
Chief Executive Officer Darren Entwistle emphasized the need to stabilize the dividend until the market better reflects Telus’s growth potential.
Financial Position and Future Goals
As of September 30, Telus reported long-term debt totaling $25.7 billion. The company aims to reach a target of three times net-debt-to-earnings before interest, taxes, depreciation, and amortization (EBITDA) by the end of 2027.
Analysts’ Perspectives
Analyst feedback has questioned the sustainability of Telus’s dividend payout growth. CFO Doug French indicated a cash-flow payout ratio anticipated at 75 percent by the end of 2025, but some analysts from J.P. Morgan and Veritas Investment Research believe this ratio might exceed 100 percent in the coming years.
- CIBC’s Veleyny Saavedra noted the pause could positively impact the market.
- This marks the second time in 2023 that a telecom company has faced scrutiny over its dividend; BCE previously cut its dividend amid similar concerns.
The strategic pause in dividend increases is viewed as a necessary step for Telus to maintain financial stability while continuing to pursue substantial growth in the long term.
