Telus (TSX:T) stock dipped more than 9% in April as dividend cut fears escalated. Is this a replay of what happened to BCE (TSX:BCE) a year before? At least the series of events hints at it.
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Is Telus walking in BCE’s footsteps?
Let’s look back at the period from December 2024 to May 2025. BCE first paused dividend growth, then changed the dividend-reinvestment plan (DRIP), and finally cut the dividend by 56% after reporting a 1.1% decrease in revenue and 8.1% decrease in free cash flow (FCF) in 2024.
Telus ended December 2025 with a pause in dividend growth and has changed its DRIP plan, phasing out the 2% discount on treasury shares by 2027. It reported 1% revenue growth and 11% FCF growth in 2025 and expects things to improve in 2026, with a revenue growth guidance of 2-4%.
While Telus and BCE are running parallel on the dividend decisions, Telus is in a relatively better position than BCE was before it announced the dividend cut.
The balance sheet strength of Telus and BCE
BCE had a net debt of 3.8 times its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) at the end of 2025. It aims to reduce this to 3.5 times by 2027 and 3.0 times by 2030. The weak balance sheet not only led to a dividend cut but also made BCE alter its long-term dividend payout policy to 40-55% from the previous 65-75%.
Thankfully, Telus has accelerated its deleveraging, reducing its leverage ratio to 3.4 times in 2025. It aims to reduce this ratio to 3.0 times by 2027. Telus has so far retained its dividend payout policy at 60-75% of FCF. Comparatively, Telus has a stronger balance sheet than BCE.
Behind this difference in BCE and Telus fundamentals is their business strategy after the regulatory change. BCE made the bold move to restructure its business model from telco to techno, acquiring U.S.-based Ziply fibre and building enterprise solutions, like cybersecurity, cloud, and artificial intelligence (AI). Telus has merged its digital solutions business, which it has built from scratch, and expects its AI-enabling revenue to grow at an average annual rate of 30% to $2 billion by 2028.
Where Could Telus Stock Be in 3 Years?
The next three years, from 2026 to 2028, are crucial for Telus as the management will make some difficult decisions to improve its balance sheet. I would not rule out the possibility of halving dividends, as it would bring $1.3 billion of savings, which can be used to repay debt.
If Telus makes this bold move of a dividend cut, the stock price could see a remarkable recovery of 20-25% in the first year, like BCE. Telus management’s priority would be to achieve the 3.0 times leverage ratio at the earliest to reduce liquidity risk and bring it within the target range of 2.2-2.7 times. Simultaneously, Telus’s AI-enabling revenue could drive growth. After three years, Telus would have resumed dividend growth and lowered its balance sheet leverage to manageable levels.
Should you buy this stock now?
Now is a good time to buy Telus stock, while it trades near its multi-year low. Either the stock has already bottomed out near $16 or could fall another 5-10% before it begins a recovery rally. If you buy the stock, be prepared for dividend cut risk and a sharp share price rally in the next three years.
