Telus (TSX: T) has been one of the most reliable dividend stocks on the TSX for years. Through its dividend growth program, the communications giant has consistently rewarded shareholders with dividend increases year after year.
Since 2004, Telus has returned approximately $25 billion in dividends. However, the company’s dividend story took an unexpected turn in December 2025. Management announced a pause to its dividend growth program while maintaining the quarterly dividend at $0.42 per share.
The move aims to strengthen the balance sheet and reduce net debt. However, it also highlighted growing pressure on profitability.
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Why is Telus facing pressure?
Canada’s telecom sector is navigating one of its most challenging competitive environments in years. Aggressive wireless promotions and price competition are weighing on revenue growth across the industry. At the same time, lower average revenue per user (ARPU) and compressed margins are making it harder for telecom companies to grow earnings.
The impact is already visible in Telus’s financial results. Adjusted net income fell to $1.41 billion in 2025 from $1.55 billion in 2024. Meanwhile, adjusted earnings per share (EPS) declined 12% year over year to $0.23 in the first quarter of 2026.
Is the dividend still safe?
The market’s concerns have pushed Telus stock lower, sending the dividend yield above 10%. Such a high yield naturally raises questions about sustainability. At first glance, the payout appears supported by cash generation. Telus expects consolidated free cash flow of approximately $2.5 billion in 2026, representing about 10% growth from the prior year. Based on those projections, management estimates a dividend coverage ratio of roughly 75% of free cash flow.
Several factors support Telus’s long-term investment case. Telus continues to add customers, maintain strong subscriber retention, and generate healthy cash flow. At the same time, management is focused on reducing debt and likely to benefit from the expected decline in capital spending requirements. Together, these trends should improve financial flexibility and strengthen the company’s ability to continue returning cash to shareholders.
Further, Telus’s ongoing investments in PureFibre and 5G+ infrastructure are likely to support future growth. These networks help strengthen its competitive position, attract higher-value customers, and support long-term subscriber growth. The company’s investments in artificial intelligence (AI) could also create new revenue opportunities while improving operating efficiency and margins.
Beyond its core telecom business, Telus is building additional growth engines. TELUS Health continues to deliver steady revenue and EBITDA growth, while Telus Digital is benefiting from rising demand for AI-powered solutions. In the first quarter alone, AI-related revenue at Telus Digital increased 22% year over year, highlighting the potential of this expanding business segment.
The company’s recent performance and payout ratio suggest the current dividend remains manageable. However, investors should remember that double-digit yields are risky. If competitive pressures continue to weigh on earnings and cash flow growth, maintaining such a high yield could become difficult.
The bottom line
Telus’s dividend does not appear to be in immediate danger. The company’s cash flow outlook provides reasonable coverage for the current payout, and management has reaffirmed its commitment to maintaining the dividend.
That said, investors should remain cautious. The pause in dividend growth, intense competition in the telecom sector, and Telus’s exceptionally high dividend yield signal ongoing challenges and long-term uncertainty regarding its payouts.
