Investing in blue-chip dividend stocks that generate steady cash flows allows you to begin a low-cost passive-income stream. One such TSX dividend stock is Telus (TSX:T), which offers you a forward yield of more than 8%, given its annual payout of $1.66 per share in 2025.
Telus is a Canadian telecommunications and technology company operating through two segments. Its Technology Solutions segment provides mobile and internet services, cloud solutions, healthcare technology, and smart supply chain systems. The Digitally-Led Customer Experiences segment delivers AI-powered digital transformation and customer experience solutions.
Based in Vancouver, Telus serves customers across Canada with integrated telecommunications and IT services. In the last decade, Telus stock has returned 64% to shareholders even after adjusting for dividend reinvestments. Comparatively, the TSX index has more than tripled investor returns since November 2015.
Telus soared to an all-time high in early 2022 and is down over 40% from record levels, increasing its dividend yield to over 8%. Let’s see if Telus stock is a good buy right now.
Can Telus stock recover over the next 12 months?
Telus reported solid third-quarter results, showcasing the strength of its diversified telecommunications and technology business model. The telecom giant added 288,000 total mobile and fixed customers, marking the best performance in the industry.
Total customer connections reached nearly 21 million, representing a 5% year-over-year increase. The company’s postpaid mobile phone churn remained industry-leading at 0.91%, the 12th consecutive year below the 1% threshold, a clear competitive advantage that drives higher customer lifetime value.
The Technology Solutions segment delivered 3% EBITDA (earnings before interest, tax, depreciation, and amortization) growth despite ongoing pressure on mobile average revenue per user, which declined 2.8% but showed sequential improvement.
Telus reported internet additions of 40,000 in Q3, driven by the expansion of its PureFibre network. Management emphasized that it plans to bundle multiple services to improve overall customer economics and offset ARPU (average revenue per user) headwinds.
Telus Health continued its strong growth trajectory with revenue and adjusted EBITDA climbing 18% and 24% respectively. The LifeWorks integration has generated $417 million in combined annualized synergies, nearly triple the original $150 million target set at the time of the acquisition’s closing in September 2022. Recent acquisitions, such as Workplace Options, are also improving operational margins through platform integration.
The completion of the TELUS Digital privatization marks a significant strategic milestone. Management expects this deal to generate $150 million to $200 million in annualized cash synergies. The integration eliminates public company costs and leverages the telecom leader’s stronger credit profile to reduce borrowing expenses.
Combined with organic initiatives, the company’s AI-enabled revenue is projected to reach approximately $800 million by 2025 and is expected to surpass $2 billion by 2028, representing over 30% annual growth.
Telus strengthened its balance sheet through the Terrion tower partnership with La Caisse, which closed in September and already operates 3,000 wireless sites. The leverage ratio improved to 3.5 times, down 20 basis points sequentially, and it remains on track to reach its 3.0 times target by 2027.
Free cash flow increased 8% to $611 million, supported by EBITDA growth and lower capital expenditures.
Is Telus stock undervalued?
Analysts tracking Telus stock forecast adjusted earnings per share to expand from $0.98 in 2025 to $1.39 per share in 2029. In this period, free cash flow (FCF) is projected to improve from $2.10 billion to $3.34 billion.
Today, Telus stock trades at a forward FCF multiple of 12.9 times, which is below its 10-year average of 21.3 times. At its current multiple, the TSX tech stock could gain over 30% within the next three years. If we adjust for dividends, cumulative returns will be closer to 60%.
A growing FCF base should translate to consistent dividend hikes. Telus has raised its annual dividend from $0.84 per share in 2015 to $1.56 per share in 2024. Analysts forecast the annual payout to rise to $2.18 per share in 2029.
