TELUS (TSX:T) remains one of the biggest telecom companies in Canada. As the third-largest, this stock also comes with one of the largest and arguably most stable dividends on the TSX today. Even during trying times, the company continues to make efforts to increase its dividend year after year.
Yet how stable is it really? Today, we’re going to take a look at the dividend history of Telus stock, and whether that might change in the future.
Recent results
TELUS continues to demonstrate strong financial and operational performance. In the first quarter of 2024, the telco reported record customer growth, adding 209,000 new mobile and fixed-line customers, which is the highest for any first quarter in the company’s history. This growth was driven by increased demand for their mobility and fixed services.
Furthermore, TELUS stock saw 4.3% growth in adjusted earnings before interest, taxes, depreciation and amortization (EBITDA), reaching a margin of 37.6%, and an improved consolidated margin year over year. The company has also been effective in managing costs and driving efficiencies, which has contributed to robust financial results despite a challenging macroeconomic environment.
Then there was the company’s dividend program. TELUS stock announced a 7% increase in its quarterly dividend to $0.3761 per share, reflecting a strong commitment to returning value to shareholders and maintaining a high dividend yield, currently at 6.68% as of writing.
The history behind the dividend
When it comes to the history of that dividend, investors want to know if the company can keep it up, and if it has in the past. TELUS stock has a long history of paying dividends, as well as making increases. Over the past decade, the company has consistently paid quarterly dividends, while gradually increasing the payout.
In fact, TELUS stock has a history of increasing its dividend payments multiple times each year. For instance, in 2019, dividends increased from $0.2725 in early 2019 to $0.2815 by mid-year. Over time, the quarterly dividends have risen from $0.1125 in 2007 to over $0.38 in recent years, highlighting a consistent upward trend.
TELUS stock’s approach to dividends reflects its stable cash flow and strong financial performance, which has allowed the company to maintain and grow its dividend payouts consistently. In fact, in 2022, the company stated it would continue to make semi-annual dividend increases between 7% and 10% from 2023 through to 2025.
What you get now, and is it safe?
The focus on growing the dividend each year through 2025 would suggest that the dividend is safe. However, that would also mean the company might be using income to support a dividend, rather than grow the business. That’s why we need to look at the payout ratio.
In this case, TELUS stock currently operates with a payout ratio at 264% as of writing. This is far from its target of between 60% and 75%, and higher than what analysts would recommend. So, therefore, the company seems to be prioritizing cash for shareholders over investing in growth. And that could come around to bite shareholders later on.
For now, however, TELUS stock will be paying out $1.50 per share on an annual basis. In 2023, the company paid out $947 million in dividends, at a rate of $1.4544 per share. If that continues this year, the company could pay out about $977 million in dividends, a $50 million increase. As to where that money is coming from, we’ll have to wait and see.
