This TSX Dividend Stock Is Down 26% and Still Worth Every Dollar

Given its discounted valuation, resilient telecom operations, expanding healthcare and digital businesses, and ongoing deleveraging efforts, Telus offers an excellent entry point for income-focused investors.

| More on:
Key Points
  • Attractive Valuation and Reliable Dividends: After a 26% decline, Telus offers a compelling buying opportunity with a discounted valuation and a robust quarterly dividend yield of 9.79%.
  • Strategic Growth and Deleveraging: Telus is enhancing long-term prospects by investing in 5G and digital health while focusing on debt reduction, positioning itself for future growth amidst telecom sector challenges.

Dividend stocks can play a vital role in long-term wealth creation, as they offer investors a combination of capital appreciation and steady passive income through regular dividend payouts. Companies that consistently pay dividends often operate mature and well-established businesses that generate stable cash flows, enabling them to reward shareholders even during uncertain economic periods. Thanks to their resilient business models and dependable payouts, dividend-paying stocks are generally less vulnerable to economic downturns and broader market volatility.

Although Canadian equity markets have rebounded sharply in recent weeks, several quality companies continue to trade well below their recent highs. One notable example is Telus (TSX: T), whose stock remains more than 26% below its recent peak. Against this backdrop, let’s examine Telus’s recent performance, growth outlook, dividend profile, and valuation to determine whether the telco presents an attractive buying opportunity for long-term investors.

dividend stocks are a good way to earn passive income

Source: Getty Images

Telus’s first-quarter performance

Telus is one of Canada’s three largest telecom providers, offering nationwide wireless and broadband services to consumers and businesses. Last month, the company reported mixed first-quarter results, with revenue declining 0.6% year over year, driven by weaker contributions from its TELUS Technology Solutions and TELUS Digital segments. However, stronger performance from the TELUS Health division partially offset the decline.

Amid softer revenue and elevated operating expenses, Telus reported net income of $144 million, down from $301 million in the same quarter last year. Excluding one-time and non-recurring items, the company reported adjusted earnings per share (EPS) of $0.23, a 11.5% year-over-year decline. Meanwhile, adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) slipped marginally by 0.2% to $1.84 billion.

Despite these near-term pressures, Telus generated solid free cash flow growth during the quarter, rising 19.5% to $583 million, largely driven by lower income tax payments.

Having reviewed its recent quarterly performance, let’s now examine Telus’s long-term growth prospects.

Telus’s growth prospects

The continued expansion of e-commerce, remote work, and learning, and the rising adoption of artificial intelligence (AI) technologies are driving higher demand for reliable telecommunications services, creating a favourable environment for Telus. To capitalize on these trends, the company continues to invest heavily in expanding its 5G wireless and broadband infrastructure, which should help the company grow its subscriber base and strengthen its long-term financial performance.

Beyond its core telecom operations, Telus is also expanding its healthcare and digital businesses through a combination of acquisitions and organic growth initiatives. The company continues to strengthen its presence in electronic medical records solutions, patient health management services, health benefits administration, and virtual healthcare services, all of which could become meaningful long-term growth drivers.

For 2026, management expects consolidated service revenue and adjusted EBITDA to grow by 2-4%, while forecasting free cash flow of approximately $2.45 billion, representing year-over-year growth of about 10%.

Supported by improving cash flow generation, Telus has also been focused on reducing leverage. Management expects its net debt-to-adjusted EBITDA ratio to decline to 3.3 by the end of this year and further improve to 3.0 by the end of next year. Given these initiatives and expansion opportunities, Telus appears well-positioned to deliver steady, long-term growth.

Investors’ takeaway

Telus has faced significant pressure over the past few years due to intensifying competition in Canada’s telecom industry, elevated debt levels, and the suspension of its multi-year dividend-growth program. As a result, the stock has declined roughly 26% from its 52-week high. However, this pullback has also made the valuation more attractive, with Telus currently trading at a next-12-month price-to-sales multiple of just 1.3.

In December 2025, the company paused its long-standing dividend-growth program as part of its broader effort to strengthen its balance sheet and accelerate deleveraging initiatives. Despite that move, the company continues to offer an attractive quarterly dividend of $0.4184 per share, yielding approximately 9.79%.

While some investors remain concerned about the sustainability of the payout given the company’s elevated payout ratio, any future dividend adjustment could ultimately improve Telus’s financial flexibility by enabling faster debt reduction and reinforcing its balance sheet.

Given its discounted valuation, resilient telecom operations, expanding healthcare and digital businesses, and ongoing deleveraging efforts, Telus appears well-positioned for long-term recovery and could be an attractive opportunity for income-focused investors willing to tolerate near-term volatility.

Fool contributor Rajiv Nanjapla has no position in any of the stocks mentioned. The Motley Fool recommends TELUS. The Motley Fool has a disclosure policy.

More on Dividend Stocks

up arrow on wooden blocks
Dividend Stocks

2 Great Canadian Dividend Stocks That Just Raised Their Payouts Again

These companies have delivered annual dividend growth for decades.

Read more »

a man relaxes with his feet on a pile of books
Dividend Stocks

TFSA Passive Income: 3 Incredible Stocks That Earn $2,148/Year

These Canadian stocks have a solid history of dividend distribution and are likely to sustain their payouts in the years…

Read more »

The sun sets behind a power source
Dividend Stocks

Why This Canadian Utility Stock Could Be the Best Stock You Never Think About

This mini-Fortis (FTS) stock is a high-yield Canadian utility stock hidden in plain sight

Read more »

Offshore wind turbine farm at sunset
Dividend Stocks

While Interest Rates Sit Still, These 2 Dividend Giants Look Good

Looking for more income? Check out these two high-income stocks!

Read more »

Colored pins on calendar showing a month
Dividend Stocks

How to Build a Monthly Paycheque Portfolio With Only 5 Stocks

Explore how to build a monthly income with stable dividend stocks in Canada. Grow your paycheque with smart investments.

Read more »

Start line on the highway
Dividend Stocks

Canada Has $500 Billion of Major Projects in the Pipeline: Here’s the Stock I’d Buy

Canada’s plan to speed up approvals for mega-projects could make WSP a key winner long before construction even starts.

Read more »

Concept of multiple streams of income
Dividend Stocks

This 4.1% Dividend Stock Is Such an Easy Passive Income Play

A 4.1% yield might not turn heads, but TC Energy's growing natural gas network makes this dividend stock an easy…

Read more »

Canadian Red maple leaves seamless wallpaper pattern
Dividend Stocks

The Companies Quietly Rewarding Canadian Shareholders While No One’s Watching

Some of Canada's steadiest dividend growers never make the headlines. Here are two TSX stocks quietly putting more cash in…

Read more »