Not every investor has the same “definition” and criterion when it comes to top stocks for dividends. Some focus on yield alone, others add sustainability to the mix, while some investors prefer a healthy mix of dividends and capital-appreciation potential. If that’s what you prefer as well then currently high-yielding Telus (TSX:T) might be a great choice for you.
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The company
Telus is one of the three telecom giants that dominate the telecom industry in Canada. While it shares many of its rival’s characteristics and business models, it’s also expanding into some unique niches (for a telecom company). This includes home security, telehealth, and software (with an artificial intelligence, or AI, focus), allowing it to explore a much more comprehensive range of opportunities.
Like its competitors, Telus has a firm footing in certain parts of the country, predominantly in British Columbia and Alberta. The company plans to invest $17 billion in various infrastructure and green projects in British Columbia alone by 2028. It has over 1.9 million customers (households and businesses) in the province for its TELUS PureFibre internet alone.
Telus might have a slight edge over its competitors with a solid regional footing and a diverse business model. Even though it is not the top 5G stock in the country, it’s just as well-positioned as its peers to benefit from the upcoming Internet of Things (IoT) revolution, which might be huge for telecom companies.
Telus: A top choice for passive income
Telus remains a top choice for passive income in Canada mainly because of the hefty discount it’s still trading at. It’s still down 34% from its peak, and this decline has caused its yield to boost to a juicy level of 6.9% at the time of writing this. This is enough to start a $115-a-month passive income with $20,000 capital invested.
The yield is especially high for an Aristocrat as established as Telus, which has grown its payouts for 19 consecutive years, and the growth rate has been quite decent. The payouts have grown by 33% between 2020 and 2024.
But more importantly, it was a decent grower before the current sector-wide decline caused it to lose a third of its market valuation. Once the market stabilizes, the stock may offer decent capital-appreciation potential (long-term) and, if you lock in the current yield, a generous, inflationation-resistant passive income.
Foolish takeaway
These strengths make Telus not just a top choice for passive income (for now, at least) but also a solid long-term addition to your portfolio for both growth and dividends. The only weakness of this stock right now is that, despite the slump, it is quite overvalued. The payout ratios are high as well, but it’s unlikely to break its dividend-growth streak.
