The post-pandemic market has been a roller-coaster ride for several blue-chip stocks. Some of the biggest beneficiaries were tech and oil stocks. Meanwhile, Canada’s telecom sector was surrounded by headwinds, with no end to the challenges. Despite the headwinds, one telecom stock continued to grow its market share and profits. However, the stock market priced in the current challenges and pulled the stock down 36% from its all-time high to its 10-year low.
Why is this Canadian blue-chip stock trading at a decade-low price
The Canadian blue-chip stock is Telus (TSX:T). The world has changed for the Canadian telecom sector as competitive pricing has become the norm after regulatory changes allowed network sharing among competitors.
On top of that, economic policies haven’t been quite favourable for telcos, which spent billions of dollars on fibre infrastructure and spectrum. Moreover, the U.S. tariffs affected discretionary spending, causing consumers to opt for basic plans instead of premium plans.
Another shocker was the government’s policies to reduce immigration. Immigrants are the major source of revenue growth for telcos.
Low demand for premium plans, moderating growth of new customers, and competitive pricing are creating challenging times for telcos. However, these challenging times bring value investing opportunities.
Telus is seeing a low mid-single-digit revenue growth despite a 3.7% dip in ARPU (average revenue per user) to $57.13 in the first quarter of 2025. This hints that the telco is gaining market share.
As Telus management puts it, revenue growth is a result of spectrum and fibre infrastructure spending. The real return on investment will come when these customers opt for premium plans, which seems less probable unless economic conditions improve.
Hence, Telus has revised its annual dividend-growth rate to 3 to 8% for the 2026 to 2028 period, which is lower than the previous 7-10%.
Who should buy this Canadian blue-chip stock at the dip?
Telus is well-positioned to withstand the challenges and continue paying and even growing dividends. It has reduced its dividend-payout ratio to 76% in the first quarter of 2025 from 81% in the full year 2024. It looks to improve its free cash flow by reducing capital spending, debt, and operating expenses.
Telus is a dividend growth stock and is best suited if you
- Want to stay invested for the long term;
- Want to preserve your wealth; and
- Get regular inflation-adjusted payouts on your investment now or later.
Remember, Telus may not be a good option if you want to grow your invested amount and build wealth. That requires growth stocks that can generate 15-20% annual returns.
Telus stock is trading at an attractive valuation of 20 times its forward price-to-earnings (P/E) ratio. If you invest now, you can lock in a 7.2% annual dividend yield and a chance to participate in the stock price rally as the telco monetizes its 5G infrastructure.
What kind of returns can you expect from Telus?
If you stay invested in the stock for the next 10 years, you will benefit from a higher dividend yield, plus a 3-8% dividend growth, which you can compound by opting for the dividend-reinvestment plan (DRIP). As of March 31, 2025, 34% of Telus’s gross dividend is in DRIP.
A $10,000 investment in Telus on January 1, 2013, bought 613 shares that gave $405 in annual dividends. In 10 years (2022), DRIP compounding and a 7% dividend-growth rate increased the share count to 886.68 and the annual dividend to $1,181 while increasing the investment amount to $26,414.
The next 10 years could see similar or slower growth, as 5G opportunities will be partially offset by price competition.
