Is Telus a Buy, Hold, or Sell?

TELUS (TSX:T) stock has a lot of competition ahead of it, so even with strong free cash flow and a high dividend, there are other points to consider.

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TELUS (TSX:T) is in a bit of a pickle. The telecommunication company seems to have competition at all corners of its business. Whether it’s the merger of telecommunication giants or wireless providers, TELUS stock is going to have a lot to contend with in the near and distant future.

So, can it meet the challenge? Let’s look at some reasons to buy, hold, or sell the stock on the TSX today.

Buy

There are still some good reasons to consider buying Telus stock right now. The company continues to hold an extensive fibre network, offering a significant advantage over other competitors in terms of speed, reliability, and future proofing. This could help lead to higher subscriptions, putting TELUS stock in charge of premium prices. All while seeing lower costs since its fibre network is already in place, with lower maintenance costs.

The company also offers a healthy wireless segment as a market leader with a 30% market share in the Canadian wireless market. It’s also entered a network-sharing agreement with BCE (TSX:BCE), strengthening its coverage. This could also lead to more subscriptions.

Furthermore, the company is strong at a basic level. TELUS stock holds high free cash flow, and with the bulk of its fibre network investments complete, this should only continue. That could lead to higher dividends and share buybacks as well as further investments.

Hold

A lot of the reasons to buy are also reasons to hold, especially since it is already in a strong position with its market share and fibre network. Yet there is also growth potential, with the growing population and immigration trends leading to more adoption of TELUS stock in the future.

However, there is also a potential for its long-term investment. That would be specifically with the TELUS International (TSX:TIXT) segment. However, this also introduces risk, as well as growth potential.

There is also a dividend to consider, which would provide you with reason enough to hold the stock while it figures out its next move. That dividend is currently at a whopping 6.6% as of writing! So, that certainly will be an added bonus.

Sell

This all being said, there are fears about TELUS’s future. This comes mainly down to competition and that risky investment in its international segment. The potential merger of Quebecor and Freedom Mobile would disrupt the market by offering lower prices. This would squeeze profit for TELUS stock.

Further, government regulations aimed at promoting competition could limit the growth of TELUS stock as well as its ability to raise prices or expand services. With such a mature market, there really isn’t much more room to grow by leaps and bounds as there have been in the past.

This is likely why it’s taken on this international and tech venture, but that comes with risks. The investment in health, security, and agriculture could be promising but remain unproven. Plus, they may not generate profits for some time. And that could draw down the overall return on investment.

Bottom line

What an investment in TELUS stock will come down to is your own risk assessment. If you’re looking to take out money in the next few years, now may not be the time to buy. If you have the stock, though, and are looking to hold for the long term, you could certainly hold on for the dividend at least. But if you need the cash, I would consider aiming for a goal and sticking to it, taking the return you need to have peace of mind.

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 Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool recommends TELUS and Telus International. The Motley Fool has a disclosure policy.

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