There are some stocks in the market that are very difficult to assess. On the one side, investors who have been bearish may have been directionally correct in recent months. However, with some companies like Telus (TSX:T) still retaining very strong customer retention and a cash-producing core business, the question is how much to make into such recent declines.
Indeed, this recent decline is a notable one, particularly over the past four years. Let’s dive into whether investors may want to consider the recent bump as a buying opportunity, why I think this stock is a hold right now, but could be a speculative buy for some investors.
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There’s still an investing thesis here
Telus continues to put up the kind of operating metrics dividend investors like to see. In 2025, the company added more than one million mobile and fixed customer additions. This amounted to industry‑leading net adds for a fourth straight year. Postpaid churn remains below 1%, underscoring a sticky customer base and strong network‑plus‑service bundle. That customer growth is showing up in cash generation, with adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) up about 3% in 2025 and record free cash flow of roughly 11% year over year to about $2.2 billion.
Management’s 2026 playbook is essentially “stabilize and grow.” The Telus team is now guiding to 2–4% consolidated service‑revenue and adjusted earnings before interest and taxes growth, while trimming capital expenditures (capex) to about $2.3 billion. That’s roughly 10% below 2025 levels.
Given this lower capital intensity, paired with solid mid‑single‑digit EBITDA growth, I think investors looking for free cash flow to grind higher and gradually de‑risk the balance sheet may have something to grasp onto here.
A dividend that’s still potentially worth considering
For income investors, Telus’s dividend remains the headline draw, with a yield in the high‑single‑digit range around 9%. On a cash‑flow basis, the payout is more manageable, with a payout ratio of roughly 45% of cash flow. However, earnings‑based payout ratios north of 150% highlight how dependent the dividend is on continued free cash flow (FCF) growth and low capital spending. Management has already paused dividend growth and is explicitly targeting a 75% FCF payout and net‑debt‑to‑EBITDA of about 3.3 times by the end of 2026, from roughly 3.5 times today.
That combination tells you two things: the current dividend looks reasonably covered by cash generation, but there is almost no room for operational missteps or another leg higher in rates. If Telus can hit its modest growth and capex targets, investors could get paid handsomely to wait for a slow de‑leveraging story.
The bottom line
I don’t think Telus is a screaming buy right now. In fact, there are reasons the market is hesitant to fully re‑rate this name. Fourth‑quarter 2025 results missed expectations, with earnings per share of $0.20 versus the $0.25 forecast and revenue about 3% below consensus. To me, this reflects pressure on wireless average revenue per user and weaker equipment sales. High leverage in a capital‑intensive sector and ongoing 5G/AI build‑out needs mean Telus can’t simply starve capex to protect the dividend indefinitely.
Put it together, and Telus screens as a fundamentally sound, cash‑generative telco at a discounted valuation, but with balance sheet and execution risk that justifies some caution. For existing shareholders, that’s a hold. For new money, this could be a stock to consider accumulating gradually on pullbacks rather than chasing aggressively on short‑term strength.
