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An analysis of TELUS Corporation (TSE:T, TU) reveals a high dividend payout ratio relative to earnings, prompting investor scrutiny regarding the long-term sustainability of its dividend. Despite a history of consistent increases, recent financial performance and varying free cash flow payout estimates present a complex outlook for the telecommunications giant's attractive yield. TELUS Corporation Dividend Sustainability Under Investor Scrutiny TELUS Corporation (TSE:T, TU) is experiencing increased investor scrutiny regarding the sustainability of its dividend, as an analysis highlights a high payout ratio relative to reported earnings. Despite a multi-year history of dividend increases, recent financial disclosures and analyst projections present a nuanced picture for the telecommunications provider. Dividends Under Review As of recent trading, TELUS shares were approximately CA$22.70, offering a trailing dividend yield of approximately 7.3%. Data from September 2025 indicated a similar yield of 7.40% at a stock price of CA$22.12, which stands 35.7% below its all-time high of CA$34.42 reached in August 2022. Historically, TELUS has been a consistent dividend grower, boasting 21 consecutive years of dividend increases, with an average annual increase of 7.27% over the past decade. Dividends declared per share in 2024 were $1.5566, marking a 7.0% increase over the previous year. The company has articulated a long-term guideline for its dividend payout ratio, targeting 60% to 75% of prospective free cash flow, and has committed to semi-annual dividend increases of 7% to 10% annually through to the end of 2025. Financial Metrics Raise Sustainability Questions The primary concern revolves around TELUS's dividend payout ratio. Last year, the company paid out a notably high 251% of its profit as dividends. This figure raises a red flag for many investors, as it indicates the company is distributing more in dividends than it generates in net income. Furthermore, earnings per share have declined at an approximate rate of 15% annually over the past five years, adding to the pressure on dividend coverage. When examining the free cash flow (FCF) payout ratio, the picture becomes more complex due to differing reported figures. One analysis indicated TELUS paid out 71% of its free cash flow as dividends in a recent period, which is generally considered to be within a sustainable range for mature companies. However, other data from September 2025 reported a free cash flow payout ratio of 193.9%, alongside an adjusted earnings payout ratio of 162.4%. For context, a free cash flow payout ratio between 50% and 75% is typically considered sustainable for established businesses. In capital-intensive sectors like telecommunications, payout ratios often range from 70% to 80% due to stable and predictable cash flows. A ratio consistently above 100% generally signals potential long-term unsustainability. Operational Headwinds and Forward-Looking Projections TELUS faced operational challenges in the second quarter of 2025, reporting a decrease in Adjusted EBITDA. This was attributed to a combination of factors, including reduced provisions from the prior year, increased salaries and benefits, rising goods and services costs outpacing revenue growth, lower mobile average revenue per user (ARPU), reduced mobile equipment margins, higher bad debt expense, and declining margins in fixed legacy voice and TV services. The TELUS Digital segment also saw a 26% decrease in Adjusted EBITDA. Customer additions also slowed, primarily due to decelerating Canadian population growth and increased competitive pressures. Despite these headwinds, some analyst projections offer a more optimistic outlook for dividend safety in 2025 and 2026. For 2024, an estimated $2.1 billion in free cash flow against approximately $2.3 billion in total dividends paid suggests an FCF payout ratio around 110%. Looking ahead to 2025, analysts anticipate lower capital expenditures, projecting free cash flow to increase to approximately $2.8 billion ($1.87 per share). With estimated dividends around $2.5 billion (based on the low end of the 7-10% growth target), the FCF payout ratio could improve to approximately 90%, marking its lowest in years. Further out, 2026 projections suggest free cash flow could reach $3.3 billion. The Role of Dividend Reinvestment Plans (DRIPs) An important factor mitigating immediate cash outflow for dividends is TELUS's Dividend Reinvestment Plan (DRIP). A significant portion of shareholders opt to receive dividends in the form of new shares rather than cash. While this mechanism dilutes existing shareholders over the long term, it reduces the immediate cash burden on the company, providing an additional layer of security for the cash dividend in the short term. Analyst Perspectives and Valuation While some analysts express caution regarding high-yield stocks with elevated payout ratios, others maintain that TELUS's dividend is secure for 2025 and 2026. This confidence is primarily based on the anticipated improvement in free cash flow generation and a projected decrease in capital expenditures. The company's valuation appears attractive, with a forward price-to-free cash flow ratio estimated to be under 11x for 2025 and approximately 9x for 2026. The commitment of TELUS's CEO, who has taken his salary in shares, is also cited by some as a positive signal of management alignment with shareholder value. Additionally, the company's diversified divisions, including TELUS Health and TELUS Agriculture, are seen as providing long-term growth potential amidst current sector challenges. Potential positive catalysts, such as a business-friendly federal government and future real estate sales, could further bolster financial stability. Outlook Investors will be closely monitoring TELUS Corporation's financial performance in the coming quarters. Key areas to watch include the company's ability to realize projected free cash flow improvements through operational efficiencies and reduced capital expenditures. The sustained growth of its diversified business segments will also be critical in supporting long-term dividend sustainability. While a high payout ratio relative to reported earnings poses a notable challenge, the company's stated dividend growth targets, coupled with anticipated free cash flow recovery, indicate a pivotal period for TELUS as it navigates its commitment to shareholders.
Telus (T.TO, TU) has finalized the sale of a 49.9% stake in its tower unit, Terrion, to La Caisse for $1.26 billion, an all-cash transaction aimed at accelerating debt reduction and optimizing asset allocation amidst a broader trend of asset shedding within the Canadian telecommunications sector. Transaction Overview Telus Corporation (T.TO, TU), a prominent Canadian telecommunications provider, has officially completed the sale of a 49.9% equity interest in its tower unit, Terrion, to La Caisse de dépôt et placement du Québec (La Caisse), a global investment group and Canada's second-largest pension fund. The all-cash transaction, valued at $1.26 billion (approximately $910 million USD), sees Terrion valued at over $2.5 billion. Terrion, now established as Canada's largest dedicated tower operator, encompasses approximately 3,000 sites across British Columbia, Alberta, Ontario, and Quebec. Telus will retain a 50.1% equity interest in Terrion and will continue to consolidate its financial results, while maintaining full ownership and control of all active network components and security systems. Terrion, headquartered in Montreal, will focus on infrastructure development, site management, and third-party co-location services. Strategic Rationale and Financial Implications The primary impetus for this strategic divestiture by Telus is to accelerate its deleveraging efforts. The $1.26 billion in sale proceeds will be exclusively used to reduce Telus's substantial $25 billion total net debt. This move is anticipated to decrease Telus's net debt-to-EBITDA ratio by an estimated 0.17 times, advancing the company towards its target ratio of 3.0x by 2027. This capital infusion provides Telus with significant financial flexibility, particularly in an environment of elevated borrowing costs. Darren Entwistle, President and CEO of Telus, highlighted the broader benefits of the transaction: > “This transformative partnership unlocks significant value for Telus shareholders and enhanced connectivity for our customers. Notably, it accelerates our path toward our target net debt‑to‑EBITDA ratio of 3.0x by 2027, while supporting Canada's global leadership in wireless connectivity.” He further added that the creation of Terrion enables Telus to concentrate on its innovative service offerings and next-generation connectivity, while Terrion can specialize in core infrastructure management. Broader Market Context and Sector Trends This transaction by Telus aligns with a discernible trend within the Canadian telecommunications sector, where major players are increasingly shedding non-core assets. Facing challenges such as slower growth, intensified competition, and the substantial debt incurred from 5G network buildouts, companies like Bell Canada and Rogers Communications Inc. have also engaged in divestitures. Analysts have noted a shift towards "unlocking value from business and monetizing standalone assets" as telecom giants seek to reduce costs and strengthen their balance sheets. Cell towers, media assets, and real estate have been identified as potential targets for such divestments. The robust demand from infrastructure investors for tower assets makes this an opportune time for such transactions. Emmanuel Jaclot, Executive Vice-President and Head of Infrastructure at La Caisse, underscored the strategic importance of their investment: > “With this investment, we are partnering with Telus to establish Canada's largest dedicated wireless tower operator, an important step in strengthening the country's digital connectivity and mobile network resilience.” Eros Spadotto, CEO of Terrion, emphasized the new entity's mission: > “Terrion's objectives are clear: to foster a more efficient and collaborative wireless ecosystem that unlocks value for Canadians and Canadian operators.” Outlook and Implications The finalization of this deal is expected to have several implications. For Telus, it marks a significant step towards achieving its financial targets, particularly in debt reduction, and allows for a sharper focus on its core telecommunications services. For Terrion, with the backing of La Caisse's expertise and long-term capital, it is well-positioned for accelerated growth through potential new tower constructions and acquisitions, as well as by welcoming additional mobile network operators as co-location customers. This partnership is also anticipated to foster greater competition in the Canadian wireless sector by facilitating wholesale access to tower infrastructure. The transaction underscores the growing investor interest in stable, long-term infrastructure assets within the telecommunications space and signals a continued evolution in how Canadian telecom companies manage their asset portfolios to drive shareholder value and adapt to market dynamics. Investors will closely monitor Telus's progress towards its debt targets and Terrion's expansion in the coming quarters.
The P/E ratio of Telus Corp is N/A
Mr. Darren Entwistle is the President of Telus Corp, joining the firm since 2000.
The current price of TU is 15.92, it has decreased 0% in the last trading day.
Telus Corp belongs to Telecommunication industry and the sector is Communication Services
Telus Corp's current market cap is $24.2
According to wall street analysts, 20 analysts have made analyst ratings for Telus Corp, including 2 strong buy, 10 buy, 11 hold, 1 sell, and 2 strong sell
Alright, anon, looking at a telco stock? Taking a break from chasing 100x meme coins, I see. Telus is moving because it just closed a massive $1.26 billion deal to sell a stake in its cell tower unit, which significantly cuts its debt[^0^]. While this is fundamentally bullish, the stock's price action is weak, creating a clear disconnect between the good news and the chart.
The situation with Telus is a classic battle between strong fundamentals and bearish technicals. Here’s the breakdown:
The Bullish Fundamental News: The main catalyst is the closing of the deal with La Caisse, a major Canadian pension fund, for a 49.9% interest in Telus's tower subsidiary, Terrion[^0^].
The Bearish Technical Picture: Despite the good news, the chart isn't pretty. The price action suggests the market is either ignoring the news or is more concerned with broader market weakness.
Analyst View: It's worth noting that 20 analysts covering the stock have a consensus "BUY" rating with a mean price target of $16.86[^0^]. This shows that, like the fundamental news, the professional view is positive and disconnected from the recent price action.
Actionable Insight: You have strong fundamentals clashing with weak technicals. For a long-term holder, this could be a decent entry point to accumulate a solid dividend stock with an improving balance sheet. For a trader, the price is telling you to be cautious. A smart play would be to wait for a confirmation of a trend change, like the price decisively reclaiming the 50-day MA.
Honestly, watching a telco stock is like watching paint dry. If you're looking for real volatility and alpha, you should probably get back to the Edgen Radar dashboard.