The Motley Fool

Is Telus (TSX:T) Stock a Good Candidate for Your TFSA?

Image source: Getty Images.

If you’re looking for a solid dividend stock to add to your Tax-Free Savings Account (TFSA), then Canadian telecom companies offer one of the best avenues. They operate in an environment where competition is limited and demand for telecom services is growing.

That combination makes this sector a lucrative place for investors, such as those who invest through their TFSA, to build wealth over the long run. Now, with the central bank on the sidelines for at least this year, their high dividend yields and growing payouts offer an attractive proposition. Among Canada’s Big Three telecom companies, Telus (TSX:T)(NYSE:TU) is certainly a good option to consider if you have some space available in your TFSA.

Earnings growth

In an earnings announcement in May, Telus showed that demand for its services remains strong, and it’s adding more subscribers to its network. During the quarter, Telus added 99,000 new customers to its network, up 50% over the same period last year.

Telus says its profit rose to $0.71 per share for the quarter ended March 31, up from $0.69 a year ago. Operating revenue also rose to $3.51 billion, up from nearly $3.38 billion in the first quarter of 2018, helped by higher wireless and wireline data services revenue growth.

On an adjusted basis, Telus says it earned $0.75 per share for the quarter, up from $0.73 per share a year ago.

5 TSX Stocks Under $5

Click here to learn more!

Potential risks

If you want to buy Telus stock, then you should be aware of one risk that this company is facing due to a possible ban for using equipment by Chinese vendor Huawei Technologies. Telus has a long relationship with Huawei and plans to use its gear in the deployment of its 5G networks.

Canada’s telecom operators, including Telus, have been dragged into the trade dispute between the U.S. and China. Telus has publicly warned of a material risk of higher costs if the Canadian government bans wireless carriers from working with Huawei.

Ottawa is conducting a cybersecurity review of the use of the Chinese company’s gear for 5G networks. Three of Canada’s intelligence allies — the United States, New Zealand, and Australia — have already announced restrictions on Huawei equipment for the build-out of next-generation cellular service.

Bottom line

Telus, at $48.24, is still an attractive buy for your TFSA. For long-term TFSA investors, any dip in Telus stock should be a buying opportunity to take advantage of its growing dividend yield. Telus currently pays a $2.25-a-share annual payout, yielding 4.65%.

5 Canadian Growth Stocks Under $5

We are giving away a FREE copy of our "5 Small-Cap Canadian Growth Stocks Under $5" report. These are 5 Canadian stocks that we think are screaming buys today.

Get Your Free Report Today

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Haris Anwar has no position in the stocks mentioned in this report.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss an important event.

Iain Butler and the Stock Advisor Canada team only publish their new “buy alerts” twice a month, and only to an exclusively small group.

This is your chance to get in early on what could prove to be very special investment advice.

Enter your email address below to get started now, and join the other thousands of Canadians who have already signed up for their chance to get the market-beating advice from Stock Advisor Canada.