Telus (TSX:T) sat out most of the TSX rally that occurred over the past two years. Contrarian investors are wondering if Telus stock is now undervalued and good to buy for a self-directed Tax-Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP) portfolio focused on dividend income.
Telus share price
Telus trades near $22 per share at the time of writing. The stock is up about 12% in 2025, but is way off the $34 it fetched back in the spring of 2022.
Rising interest rates caused most of the grief in the second half of 2022 and through 2023. Telus carries a lot of debt on its balance sheet. The sharp rise in borrowing costs over such a short period of time drove up interest expenses on variable-rate loans and made it more expensive to borrow additional funds.
In late 2023, the Bank of Canada signalled it was done raising interest rates to fight inflation. The central bank then started to reduce rates in the second half of last year. This led to a rebound in rate-sensitive stocks, but Telus missed the party. Price wars among the Canadian mobile and internet providers, combined with revenue declines at Telus Digital (Telus International), offset the benefit of lower interest charges. This is why Telus saw its share price decline to below $20 by the end of last year.
Bargain hunters started kicking the tires in January on the hopes that better days are on the way. That could well be the case now that prices for mobile plans have increased considerably this year. In addition, the Telus Health subsidiary is performing well, delivering a 29% increase in adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) in the second quarter (Q2) of 2025 compared to Q2 2024.
Risks
Net customer additions in Q2 fell compared to Q2 last year due in part to the drop in immigration. The decline in international students takes away an important growth segment for Canadian mobile and internet service providers.
Telus Digital’s adjusted EBITDA fell 26% in Q2 2025. Telus is planning to take Telus Digital private as it works to turn the division around.
Tariffs are starting to put pressure on the Canadian economy, and unemployment is moving higher. A recession would be a headwind for sales of new mobile devices.
Upside
Telus is focused on reducing debt. The company recently announced a deal to sell a 49.9% stake in its cell tower assets for $1.26 billion. Telus is also monetizing real estate and other assets with a goal of getting the net-debt to EBITDA leverage ratio down to three times by 2027 from an expected 3.55 times by the end of this year and 3.7 times at the end of Q2 2025. Total debt was roughly $33 billion at the end of June.
Operating revenue rose 3% in Q2 and adjusted EBITDA rose 1% compared to the same period last year, so the overall business appears to be stabilizing. Free cash flow increased 11% in Q2 2025.
Post-paid mobile churn remains below 1%, so Telus is doing a good job of keeping mobile customers from leaving.
Interest rates could continue to decline into 2026 as the Bank of Canada switches its focus to providing support for a weakening economy. Lower rates will further reduce interest expenses.
The bottom line
Headwinds persist, but most of the bad news might already be reflected in the share price. Improvements in free cash flow should support the dividend. Investors who buy Telus at the current level can get a yield of 7.6%, so you get paid well to ride out the turbulence.
If you have some cash to put to work in a portfolio focused on dividend income, this stock deserves to be on your radar.
