If you own Telus (TSX: T) for the income, here is the uncomfortable truth. The stock yields close to 10%, but that fat payout is a warning sign and not a gift.
My pick instead is Cascades (TSX: CAS), a cheaper Canadian dividend stock that could easily grow its payout while trading at a cheap multiple.
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The Telus dividend is under pressure
Telus is among the largest telecom companies in Canada. It ended 2025 with record free cash flow of $2.2 billion, up 11% year over year. It also grew free cash flow by 19% in Q1 2026.
Analysts tracking Telus stock forecast FCF to increase by 5.5% to $2.4 billion in 2026 and by 11% to $2.7 billion in 2027. It suggests that the Canadian telecom stock trades at 10 times forward (2027) FCF, which is quite cheap. Notably, the company also plans to invest $66 billion across Canada through 2030, supported by FCF growth.
Telus pays an annual dividend of about $1.67 per share, which implies an annual dividend expense of around $2.6 billion and a payout ratio of almost 100%. It’s evident why Telus has suspended dividend growth as it wrestles with high debt levels and rising capital expenditures.
Telus ended 2025 with a net debt-to-EBITDA (earnings before interest, tax, depreciation, and amortization) ratio of 3.4 times and aims to reduce it to three times by 2027.
The Canadian dividend stock offers you a tasty yield of over 9%, but shares are also down 50% from all-time highs.
Cascades is the cheaper dividend stock
Now look at Cascades, a Quebec-based maker of recycled packaging and tissue products, which trades around $10.60 per share. In June 2026, the small-cap TSX stock offers you a forward yield of 4.5%.
Analysts tracking Cascades forecast the free cash flow to improve from $227 million in 2025 to $284 million in 2027. Comparatively, its annual dividend expense is around $49 million, which translates to a payout ratio of just over 20%.
Cascades has raised the annual dividend from $0.16 in 2016 to $0.48 in 2026. Moreover, it trades at just 3.8 times forward (2027) FCF, making it one of the cheapest stocks in Canada.
In 2025, Cascades reported revenue of $4.8 billion, an increase of 2% year over year, while EBITDA rose 15% to $576 million. Its EBITDA margin widened to 12.1% in 2025 from 10.7% in 2024, allowing the company to lower net debt by $200 million.
The average analyst price target sits near $13.20, roughly 24% above the current price.
The risk with Cascades stock, and my bottom line
However, investing in Cascades carries certain risks. Adjusted EBITDA fell 6% in Q1 2026 as the conflict in Iran and the blockade of the Strait of Hormuz dented consumer confidence and raised costs. As a result, the company pushed its debt reduction target out to 2027.
Cascades is targeting $100 million in profit improvements by the end of 2026. It also wants to return to roughly $600 million in annual EBITDA in the second half of the year.
So here is my bottom line. Telus is a quality business. But the frozen dividend and stretched payout make it a hard call for income seekers right now. Cascades offers a covered and growing dividend, a much cheaper valuation, and a credible path back to growth.
For investors who want income and upside, I think Cascades is the better dividend stock to buy today. This is the kind of overlooked Canadian name that can reward patient shareholders who get in before the crowd catches on.
