Telus (TSX:T) is one of the top dividend stocks for investors seeking passive-income streams for a range of reasons. This Canadian telecom provider has provided consistently stable and growing earnings over the long term and has continued to pass on these earnings to investors in the form of rather high dividend payouts over time.
With a current dividend yield of around 7.5% at the time of writing, Telus certainly provides plenty of yield for investors right now. The question is whether this yield is worth considering or if there are better options out there.
Let’s dive into why I think this stock could be a buy here.
Performance has lagged, leading to higher yields
Looking at the stock chart above, it’s clear that investors in Telus stock have had a rather rough go over the past two years. Over this time frame, most Canadian and U.S. stocks have outperformed as investors have increasingly flocked to risk assets in the tech sector. That trade continues to show strong momentum, with other high-dividend yield stocks underperforming.
However, with the Bank of Canada firmly in interest rate-cutting mode, I wouldn’t be surprised to see bond proxies like Telus catch a bid. This company’s 7.5% dividend yield is substantial and remains a much better option for dividend investors seeking passive income relative to bonds right now.
Yes, there hasn’t been much on the capital appreciation front for some time. But when the winds shift, this is a top stock that can benefit from these moves. Here’s why.
Stable and consistent cash flows
For investors seeking stable passive income over time, finding companies with the ability to generate stable and consistent growth over time is important. Telus is one such company that strikes me as a top option in this regard.
The Canadian telecom industry is really best defined as an oligopoly, with three main players controlling the market. Prices have remained high (and may not have much room to increase over time). However, as companies like Telus continue to focus on reducing overhead costs and improving efficiency, gains could be passed on to investors in a big way. We haven’t seen the company make as much progress as its peers in this regard, but therein lies the opportunity, in my view.
If Telus can get back to providing investors with high-single-digit earnings growth over time, this stock should see its current yield decline as its share price rises. That’s my bull thesis behind this under-performing stock right now.
I think locking in a 7.5% yield and being patient is the right move here. Currently, this is a top stock on my watch list right now, but I may pull the trigger before year end if we see any sort of material declines moving forward.
