Telus (TSX: T) is up more than 10% in 2025. Investors who missed the bounce are wondering if Telus stock is still undervalued and good to buy for a self-directed Tax-Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP) portfolio focused on dividends.
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Telus share price
Telus trades near $21.50 at the time of writing. The stock has bounced around in a range of $19 to $23 in the past year after an extended slide from $34 in 2022.
Rising interest rates in 2022 and 2023 triggered the first leg of the pullback. Telus and its peers spend billions of dollars every year on network upgrades and expansion. Debt is used to fund part of the capital program. When interest rates soared, the company saw debt expenses rise on variable-rate loans and it became more expensive to issue new debt to replace maturing bonds. Higher debt expenses will cut into profits and can reduce the amount of cash that is available for dividends.
When the Bank of Canada signalled in late 2023 that it was done raising interest rates, and then started cutting rates in the second half of 2024, the share prices of many rate-sensitive stocks soared. Telus and the other communications companies, however, didn’t join the party. Price wars for mobile and internet subscribers put pressure on margins last year. Cuts to immigration and regulatory uncertainty have also hurt the sector. In addition, Telus took a hit from weaker revenue numbers at its Telus Digital (formerly Telus International) subsidiary.
Outlook for 2025
Prices on mobile plans have increased across the industry in recent months. This should stabilize revenue and margins for Telus. The company recently announced a plan to take Telus Digital private and management is setting its sights on data centre opportunities as AI becomes more widely used by businesses. Telus intends to spend $70 billion over the next five years to expand its operations and network infrastructure in Canada to power advanced digital services, including AI data facilities focused on ensuring Canadian businesses keep their data safe within the country.
Telus continues to build its Telus Health and Telus Agriculture and Consumer Goods subsidiaries. These businesses have the potential to contribute significant revenue growth in the coming years as Telus looks to diversify its operations.
Telus delivered solid Q1 2025 results, despite the challenging environment. Consolidated operating revenues and other income increased by 3% compared to Q1 2024. Total mobile and fixed customer growth came in at 218,000, up 9,000 over the same period the previous year. Telus Health had revenue growth of 12% and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) growth of 30%. Telus Agriculture and Consumer Goods saw revenue rise 20%.
Dividends
Telus announced a 7% dividend increase when it provided the Q1 2025 results. Management intends to raise the dividend by 3% to 8% per year through at least 2028. Investors who buy Telus at the current level can get a dividend yield of 7.7%.
The bottom line
Near-term market volatility is expected, but Telus pays an attractive dividend that should continue to grow. If you have some cash to put to work in a portfolio focused on dividends, this stock deserves to be on your radar.
