Telus Stock: Can the 7.4% Yielder Comeback in the Second Half?

Telus (TSX:T) stock looks like a high-yield comeback candidate for the second half of 2024.

| More on:
edit Woman calculating figures next to a laptop

Image source: Getty Images.

The Canadian telecom scene continued to descend deeper into the abyss in the first half of 2024. And though the TSX Index is in a good place to start the second half, investors should exercise extra caution when attempting to catch a falling knife within a distressed industry such as telecom. Undoubtedly, a seemingly “cheap” stock can always get a heck of a lot cheaper if circumstances take a turn for the worse.

Dip-buyers of Telus (TSX:T) and some of the other Big Three plays may know this by experience. Either way, as shares of Telus go down, the dividend yield only stands to swell further. At the time of writing, Telus stock boasts a yield of 7.4%, even after Monday’s solid 1% gain.

Telus stock: Could a big recovery be closer than we think?

The big question is whether the telecom scene has what it takes to sustain a move out of the rut in the coming months and quarters. Of course, lower interest rates could be on the way. And as capital-intensive firms with a good amount of debt sitting on the balance sheet, any such relief on rates could be a potential driver of the share price, at least from these ominous depths.

With Telus stock going for just over $21 per share, the trailing price-to-earnings (P/E) ratio remains rather hefty at 40.46 times. So much for a cheap stock!

I believe it makes more sense to view a telecom play like Telus from a forward-looking perspective. When checking out Telus stock’s forward P/E, which sits at 20.83 times, the stock looks pretty reasonably priced. It’s not a dirt-cheap bargain, but it’s a very fair price to pay for a stock that sports one of the most bountiful yields out there. Additionally, there could be considerable upside if the rate cuts keep coming in.

Telus stock doesn’t even have the highest yield in telecom!

Of course, you’d be reaching a bit of yield by going with Telus stock after its 40% drop. However, you could certainly reach further with BCE (TSX:BCE), the yield-heaviest of the Big Three Canadian telecoms right now, with a towering yield of 9.26%. And, no, that’s not a typo; the blue-chip behemoth now yields more than 9%!

Indeed, if BCE stock continues dropping without a dividend cut announcement, the 10% yield mark could still be breached. Unlike BCE, which has been cutting many staff of late, I view Telus as a slightly better growth play. Of course, asking for growth when you’re already getting a yield north of 7% seems like a huge ask.

The bull scenario for telecom stocks

That said, if rates fall faster than expected and the firm can effectively navigate macro headwinds, Telus stock may be in for a bull-case scenario that sees the stock surge higher while the dividend stays on strong footing. Between a dividend reduction and a raise, I’d have to say the latter is likeliest, even in the face of harsh headwinds.

Should more Bank of Canada rate cuts be on the table in the second half, I do see the broader telecom stocks marching steadily higher. But unless there’s a surprising dovish tilt (highly unlikely, in my opinion), such a rally may be mild in nature. Either way, the dividend is the main attraction, not the rebound potential.

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 Joey Frenette has no position in any of the stocks mentioned. The Motley Fool recommends TELUS. The Motley Fool has a disclosure policy.

More on Investing

stock research, analyze data
Dividend Stocks

How Much to Invest to Get $500 in Dividends Every Month

TSX dividend stocks such as Enbridge, TD Bank, and Telus, can help you earn $500 in monthly dividend payments.

Read more »

A solar cell panel generates power in a country mountain landscape.
Energy Stocks

Clean Energy Play: Is Brookfield Renewable a Good Stock for a TFSA?

Add this top renewable energy stock to your self-directed TFSA portfolio for significant long-term and tax-free wealth growth.

Read more »

Golden crown on a red velvet background
Dividend Stocks

Dividend Powerhouses: Canadian Stocks to Fuel Your Portfolio

These two top Canadian dividend aristocrats are some of the top stocks on the TSX to buy now and hold…

Read more »

Dial moving from 4G to 5G
Dividend Stocks

This Undervalued Dividend Stock is Worth Buying Right Now

Want an undervalued dividend stock with long-term potential and a juicy yield? Here's an option you may regret not buying…

Read more »

A worker gives a business presentation.
Dividend Stocks

1 Stock I’m Buying Hand Over Fist in July Despite the Market’s Pessimism

This top dividend stock is going through a rough patch, but don't let that count out all the growth we've…

Read more »

financial freedom sign
Investing

2 Stocks With Millionaire-Maker Potential

These two top Canadian stocks are among the best on the TSX, and each has the potential to be millionaire-maker…

Read more »

Piggy bank next to a financial report
Stocks for Beginners

Is It Finally the Right Time to Buy Bank Stocks?

Canadian bank stocks are some of the most secure investments out there, but of them all, this bank stock is…

Read more »

clock time
Investing

3 Blue-Chip Stocks Every Canadian Should Own

Want some reliable blue-chip Canadian stocks to buy and hold for the next 10 years? These three stocks are worth…

Read more »