The TSX Composite Index is facing volatility amid the trade war uncertainty. First, U.S. president Donald Trump targeted all Canadian exports to the United States, then targeted high-volume export items like oil, steel, and aluminum. Canadian stocks exposed to U.S. exports have adopted a wait-and-watch approach and reacted moderately to such announcements. While many industry experts believe tariff threats are Trump’s bargaining tactic to get the best deal, you cannot rule out an actual tariff imposition.
In such an environment of trade uncertainty, a good bargain is to buy Canadian and invest in Canadian stocks that are not significantly exposed to export or foreign exchange risk.
This Canadian stock hasn’t been this cheap in years
Telus (TSX:T) stock has slipped almost 40% since April 2022 and is trading near $20. The last time it traded at this value was in 2016. However, price is not what determines if a stock is cheap or expensive. The stock price relative to the company’s future earnings potential determines if the current stock price is a bargain.
Telus’s decline in stock price is due to falling net earnings because of high depreciation from the 5G network rollout, high interest expense on rising debt, and lower profit margin from the price war. However, things have started to reverse. The interest rates are falling at an accelerated rate, the price war is over, capital spending has been reduced, and the focus is on reducing debt. All this hints at earnings growth in the coming years.
Telus’s forward price-to-earnings (P/E) ratio is 20, taking a conservative estimate. Once the restructuring is over, the cost optimization and growing revenue from 5G adoption will drive earnings growth. It is a stock to buy the dip and hold for the next 10 years.
This Canadian stock converts risks into opportunities
Telus’s free cash flow started recovering in 2024, from $396 million in the first quarter to $561 million in the third quarter. The impact of interest rate cuts has not yet kicked in. Its $28 billion long-term debt can increase the company’s net income by $4 million on every 25-basis point decrease in interest rate.
The positive impact on Telus’s profits might not be sudden but gradual. Its first aim is to reduce the dividend-payout ratio from 77% to its targeted range of 65-70%.
Another weakness Telus is converting into an opportunity is the wholesale fibre mandate, which requires Telus and BCE to give their competitors access to their fibre network. Telus used this as an opportunity to offer its bundled services in areas where it is not an incumbent by accessing rival’s network.
It’s time to buy while this stock is still cheap
Telus stock is trading near $20. While the stock price fell, the telco increased its dividend for the first half of 2025 by 3.5% and could announce another 3.5% hike in June. Assuming the stock pays $1.637 in annual dividend per share, you can lock in a 7.8% yield. If you invest in Telus’s dividend-reinvestment plan (DRIP), it will use the dividend income to buy more stocks at a lower share price.
Now is a good time to accelerate the effects of compounding and have an edge over others who invest in Telus stock when it returns to its normal trading price of around $28.
A $10,000 investment at a $20.83 share price can buy you 480 shares, giving you an advantage of 122 shares over those who buy at a $28 price point. These 122 shares advantage can convert to $200 in annual dividends in 2025 alone. With compounding, the advantage would be significant even if Telus slows its dividend growth.
