Utility stocks tend to do well in a weak macroeconomic environment because of their stable earnings. Most natural gas and energy utility stocks rallied to their 52-week high. However, a utility is more than natural gas, water, and electricity. In this digital age, the internet has become a necessity as most work happens online.
While energy utility stocks are trading at their high end, communications utilities are trading at a decade-low. The telecom sector is reshuffling. Industry consolidation, regulatory changes, and technological upgrades are happening at once. While this is disruptive in the short term, it will be productive in the long term. A structural change is coming, and that is visible in telcos’ changing long-term targets.
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A magnificent utility dividend stock down 23%
A magnificent utility stock Telus Corporation (TSX:T) is down 23% over the last two years. The industry headwinds have changed the way telcos operate. They are now adjusting to competitive pricing and a tightly regulated market. Moreover, a change in immigration policies is slowing new customer additions. While BCE has taken a defensive approach and shifted its fibre expansion to the United States, where the market is unregulated, Telus is using the regulatory change in its favour.
The telecom regulator has asked BCE and Telus to give competitors access to their fibre infrastructure, allowing multiple internet and telecom providers to compete for select customers. Telus is using its large size and diverse offerings to offer bundled services on competitor networks. Thus, its revenue grew by 3% year-over-year to $5 billion in the first quarter of 2025, even when its average revenue per user (ARPU) fell 3.7%.
Telus is now lowering its capital spending and focusing on repaying debt. Moreover, Telus already has well-established digital services, agriculture, and health solutions that can help it monetize the 5G network by offering connected devices. The uptick in 5G momentum, the macroeconomic recovery, and an increase in discretionary spending could drive its revenue.
Telus has hit bottom in the industry turnaround. The company has slowed its dividend growth rate from 7–10% to 3–8% for the 2026–2028 period, hinting that it is prepared for competitive pricing.
Is this dividend stock a buy-and-hold forever?
The dip is because the industry is undergoing a transformation, and Telus is well-placed to benefit from the change. It has the liquidity and stable cash flow to service its debt despite macro headwinds. The telco is gradually moving to a utility-like model as artificial intelligence (AI) at the edge will drive demand for connected devices and digital services. What seems like discretionary spending today will become a necessity in a few years.
The capital spent on building the 5G infrastructure and services can generate cash flow in the long term.
You could consider buying the stock and enrolling in a dividend reinvestment plan. Utilities are good dividend payors, and since telecom is just entering into the utility sector, you could compound your dividend income by buying more income-generating shares of Telus and get 3–8% dividend growth.
