A great dividend stock is hard to find. Sure, there are plenty of dividend stocks out there with high yields, but when it comes to great stocks with a dividend attached, the list gets shorter.
Such is the case with TELUS (TSX:T). The telecommunications company has seen shares plunge in recent months, providing investors with a 6.11% dividend yield at the time of writing — one that’s far above historical averages.
Yet there are even more reasons to consider this stock on the TSX today. Let’s get right to those reasons.
Still a major player
TELUS stock seems to have dropped mainly for two large reasons. The company saw an influx of new clients that has since fallen back after the surge during the pandemic for high-speed internet. But an even more relevant issue has also come to light: the merger of Shaw and Rogers.
While BCE stock is likely to still hold the largest market cap, Rogers stock will certainly be a close second. That puts TELUS stock in a distant third at this point. The $34.96 billion company certainly makes a lot of announcements about growth opportunities. But without the might of media behind it, it’s likely to continue falling behind.
In fact, TELUS stock recently updated guidance that saw its outlook shrink back. This came from lower tech spending, with the company looking to keep cash on hand. Honestly, this is a smart move to do in the near term, with the company usually waiting for the right moment in terms of expansion. And again, it’s still a top telecom company in a country with little competition. So, don’t go thinking TELUS stock is about to disappear overnight.
Future growth ahead?
The cut in forward guidance led to a cut by analysts, with the average price still around $30 per share. It was a larger cut than anticipated, which would be felt by the company given it continues to trade a multiple premium compared to peers.
Part of the lowered guidance, however, came from short-term issues. This included delays in some projects. However, these issues could spill over in 2024, affecting the return of normal share prices in the near term.
Despite this, analysts held a “buy” recommendation, as it continues to show attractive valuations and positive long-term growth.
Digging into the data
Let’s take a look at those metrics. TELUS stock currently has a number of positives that point to solid long-term performance. Shares are down 14% in the last year, dropping 8% after the new numbers came out. Since then, it’s recovered a bit but still remains quite down.
Basically, it looks like investors are too scared to invest in TELUS stock at this moment, as they’re unwilling to pay what it’s worth. This can be seen with its price-to-earnings, price-to-sales, and earnings enterprise compared to earnings before interest and taxes (EV/EBIT) ratios. The stock trades at 23.33 times earnings, 1.78 times sales, and 9.1 times EV/EBIT. These are all numbers lower than historical averages for the company.
With all that taken into consideration, TELUS stock looks like a strong choice for that 6.11% dividend yield. The stock is sure to come back once the market and economy recover. What’s more, that dividend is far above its 4.59% five-year average. So, lock it up before it shifts back down!
