Telecom stocks are a steady and reliable source of dividend income for investors. Until something out of character happens, like what happened with BCE (TSX:BCE) stock. A massive dividend cut and many weak quarters later, many investors are understandably wary of BCE stock.
If that’s you, forget about BCE and consider Telus (TSX:T) instead, a dividend stock that’s yielding an incredible 7.58% and posting strong earnings and cash flows.
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A quick review of BCE and the telecom industry
Make no mistake, the telecom environment has been difficult for all in the industry, including Telus. In the last three years, BCE stock has been halved.
In contrast, Telus stock has declined 22% — it’s still a lot, but obviously a much better performance. So, what made the difference, you might ask?
Well, in a nutshell, it boils down to the amount of leverage that BCE held. In 2024, all telecom providers were mandated to give competitors access to their main fibre networks for a fee. And this negatively affected all of them. Today, we are seeing that this move has had the intended effect — more competition, more options for consumers, and lower prices.
This sent BCE to the breaking point, as the company was saddled with too much debt and interest payments that it could not afford. Telus, however, fared much better. Let’s take a closer look at Telus.
Telus shines
Telus has done a fine job in this challenging environment. In fact, Telus’s earnings per share (EPS) in 2024 actually increased 9.5% to $1.04, and in the first six months of 2025, EPS only declined 6%. In Telus’s most recent quarter, the evidence of the company’s strong future was on full display as the company continued to focus on diversifying its revenue base, cost-cutting, and growth areas.
For example, Telus Health saw its revenue and earnings before interest, taxes, depreciation, and amortization (EBITDA) grow very nicely, up 16% and 29% respectively. Also, the company’s EBITDA margin increased 180 basis points to 17.5%. Furthermore, Telus’s free cash flow increased 11% to $535 million. This was driven by higher EBITDA and lower capital expenditures and interest expense.
Importantly, Telus is also focusing on asset monetization as it heads into the future. An example of this is the company’s recent sale of a 49.9% interest in its wireless tower operator, Terrion. According to Telus, the majority of the proceeds from the sale are to be used to deleverage. In fact, the deal will reduce Telus’s net debt by more than $1.25 billion.
What’s ahead for Telus stock?
In the next years, Telus’s goal is to create value by focusing on its growth businesses, such as Telus Health, and to deliver on the asset monetization opportunities. As a result, management expects to deliver EBITDA growth, stable capital expenditures and free cash flow expansion.
More specifically, Telus expects revenue growth of 2-4% and EBITDA growth of 3-5%, with free cash flow of $2.15 billion. Also, Telus’s goal is to have a net debt-to-EBITDA ratio of three times by 2027. It is currently at 3.7 times.
The bottom line
BCE stock has been a real nail-biter, with weak performance hitting investors hard. For value investors who have the appetite, it might still be worth considering. However, for investors who prefer less stress and a clearer, less risky path to growth, Telus stock may be a better choice.
