Is TELUS Stock a Buy in December 2022?

Conservative stock investors should consider buying some TELUS shares, currently trading at the low end of their 52-week trading range.

| More on:
Wireless technology

Image source: Getty Images

There’s something to celebrate about high inflation and rising interest rates after all. Investors can now get a risk-free rate of return of north of 5% from guaranteed investment certificates (GICs). That’s about where the interest rate of a one-year non-redeemable GIC is right now.

If you’re still not happy with that, you can consider taking more risk by investing in dividend stocks like TELUS (TSX:T). By all means, TELUS is not a risky stock. If you compare it to the majority of stocks on the TSX, you’ll realize that it’s quite defensive.

TELUS stock’s attractive dividend

One of TELUS stock’s attractive attributes is its dividend. TELUS is a proud Canadian Dividend Aristocrat. It has paid increasing dividends for about 19 consecutive years. This is a very solid dividend track record for a TSX stock. For reference, its five-year dividend growth rate is 6.7%.

Management aims to pay out 60–75% of its free cash flow as healthy dividends. Its cash flows are quite predictable so the dividend stock currently targets dividend growth of 7–10% per year through 2025.

At writing, its dividend yield is north of 5%. Other than beating the risk-free GIC rate, TELUS stock can also provide upside potential. Oh, and of course, the eligible dividend income is more favourably taxed than interest income in taxable accounts.

Its growth prospects should magnetize you as well

The Canadian telecom has an above-average growth rate versus the industry. This is why it also commands a relatively high price-to-earnings ratio. The company has invested in higher-growth areas resulting in higher revenue growth.

Its stake in TELUS International, which designs, builds, and delivers digital customer experience solutions, pulls much of the weight of that growth. Should the growth of this business slow down, it would also weigh on TELUS’s shares. Needless to say, TELUS is a lower-risk stock because of the expected stable returns from its dividend while providing relatively high stock price gains potential versus its peers.

Currently, analysts project TELUS could grow its earnings per share by about 18% per year over the next three to five years, which is approximately 70% higher than the industry average.


For its higher growth prospects, accordingly, TELUS stock trades at a premium valuation. At $27.40 per share at writing, the big Canadian telecom stock trades at about 19.6 times forward earnings. This is a premium of about 15% to the industry average. Given the stability of the stock, its nice yield, and its higher growth potential, conservative long-term investors will probably find it worth it to park their money in T stock.

Should you buy TELUS stock in December 2022?

Analysts think the stock is undervalued by 17%. This is a decent discount for a defensive dividend stock that pays a good income. Furthermore, TELUS offers above-average growth. Investors can hold the stock in their non-registered accounts for favourably taxed dividend income so as to leave room in registered accounts for fixed-income investments such as bonds and GICs. Otherwise, if you have room, TFSAs and RESPs are also good places to hold TELUS shares.

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.

ool contributor Kay Ng has positions in TELUS and Telus International. The Motley Fool recommends TELUS. The Motley Fool has a disclosure policy.

More on Dividend Stocks

Target. Stand out from the crowd
Dividend Stocks

3 Monthly-Paying Dividend Stocks That Are Screaming Buys Right Now

These three monthly-paying dividend stocks are excellent additions to your portfolios.

Read more »

Growing plant shoots on coins
Dividend Stocks

TFSA Set and Forget: 1 Dividend-Growth Superstar for the Long Run

Manulife Financial (TSX:MFC) stock is in the zone, with dividend hikes and big buybacks likely in the cards.

Read more »

little girl in pilot costume playing and dreaming of flying over the sky
Dividend Stocks

For a Shot at $6,228/Year in Passive Income, Buy 755 Shares of This TSX Stock

Looking for passive income? You'll need to look beyond only dividends. Which is why EIF stock could be one of…

Read more »

Piggy bank with word TFSA for tax-free savings accounts.
Dividend Stocks

TFSA Investors: 2 Dividend Stocks I’d Buy and Hold Forever

These two stocks could provide long-term investors multi-year returns of more or less 10% per year

Read more »

crypto, chart, stocks
Dividend Stocks

Why Waste Connections Stock Keeps Going Up

Waste Connections stock (TSX:WCN) continues to hit all-time highs. But is more on the way, or is an investment wasteful?

Read more »

Money growing in soil , Business success concept.
Dividend Stocks

A Dividend Giant I’d Buy Over Suncor Stock

Suncor Energy is a blue-chip TSX dividend stock that offers you a tasty yield. But this TSX dividend giant is…

Read more »

Two seniors walk in the forest
Dividend Stocks

Passive Income Investors: The Best Bargain to Buy in June

Passive income investors shopping for stocks to own this month will be hard-pressed to find two better options that can…

Read more »

Dividend Stocks

Love Real Estate? 3 Top TSX REITs to Watch in June

For investors seeking exposure to real estate investment trusts, or REITs, here are three top Canadian options to consider buying…

Read more »