The telecommunication industry remains one of the essential industries for the modern world. While there have been certain changes affecting it, telecom stocks like Telus Corp. (TSX:T) continue to reap the rewards of this lucrative business. Today, Telus has a very generous dividend yield of 7.2%.
Here’s why I’m a buyer of this dividend darling.
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Strong cash flow growth supports growing dividend
In the five years ended 2024, Telus’s performance was characterized by rapid growth and improved efficiency metrics. For example, revenue increased 31% to $20 billion, representing a compound annual growth rate (CAGR) of 5.6%. Also, operating cash flow increased approximately 12% to $4.8 billion, which represents a CAGR of 2.4%.
More recently, growth in Telus’s cash flows has picked up as Telus is seeing momentum in its net additions, strong loyalty results and low churn. This momentum translated into a 13.4% increase in operating cash flow and a 22% increase in free cash flow in the first quarter of 2025.
In terms of Telus stock’s dividend, I think it would be useful to not only look ahead, but also to review its strong history for a glimpse of what has been accomplished. Most recently, Telus instituted a 7% increase in its dividend to $1.6652 in its most recent quarter (Q1). This was the 28th increase since Telus’s dividend program was initiated in 2011. Since 2004, the company has returned more than $43 billion to shareholders, including more than $18 per share in dividends.
These strong cash flows provide confidence in Telus’s robust outlook for consistent long-term growth. This, plus Telus’s strong diversification efforts and continued focus on cost-cutting, drives my positive view on Telus stock.
Looking ahead
Looking to the future, Telus Health remains a strong opportunity for Telus. As the telecom industry continues to deal with an evolving environment that’s threatening its pricing power and returns, Telus is investing in its differentiated growth segments, such as Telus Health and Telus Agriculture.
For example, Telus Health continues its strong growth trajectory, as it capitalizes on the opportunity in the Canadian healthcare sector. Telus Health is utilizing its extensive network of broadband and digital telecommunication assets, offering virtual healthcare, electronic records management and more. In the first quarter, Telus Health posted a 12% revenue growth rate and a 30% growth rate in earnings before interest, taxes, depreciation, and amortization (EBITDA).
Similarly, Telus Agriculture and consumer goods are seeing strong momentum. For example, revenue in Q1 increased 20%, with enhanced profitability. This follows a 20% revenue growth rate in the prior quarter as well.
The bottom line
Telus is pursuing differentiation across the company’s different segments. The goal is to end the pricing pressure and to improve its offering, while reducing its costs. To this end, Telus has made good progress.
The current dividend yield is supported by Telus’s strong cash flows and growth. In the years ahead, the company expects that its growth, coupled with lower capital expenditures, will support its dividend program and shareholder returns. We can expect a 3% to 8% annual dividend-growth rate from 2026 to 2028.
