Not long ago, Canadian telecom stocks were the definition of boring in the best possible way, and TELUS (TSX: T) was right at the top of that list.
Today, the picture looks very different. Trading near $16.50, TELUS has lost roughly half its value from the April 2022 peak of nearly $34. However, the pullback has meant that the blue-chip dividend stock offers you a tasty 10% yield.
The question every dividend investor in Canada is asking right now is simple: Is this a buying opportunity or a value trap?
I think it is closer to the former. Here is why.
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Why TELUS stock is down 50%
TELUS stock has grossly underperformed the broader markets over the last four years.
- First, interest rates. TELUS borrowed heavily to build out its fibre-optic network and buy 5G spectrum. When the Bank of Canada raised rates aggressively, the cost of carrying that debt accelerated, making investors nervous.
- Second, competition. Quebecor’s Freedom Mobile turned the wireless market into a pricing war, which squeezed revenue per subscriber across the whole industry, and TELUS was not immune.
- Third, dividend anxiety. When BCE slashed its dividend last year, investors started looking at every high-yield telecom with fresh suspicion. TELUS got caught in that wave of concern, even though it never cut its payout.
The bull case for this TSX dividend stock
TELUS added 262,000 new subscribers in Q1 while free cash flow rose 19% year over year to $583 million.
Outgoing CEO Darren Entwistle told shareholders at the AGM that the company has consistently beaten its own free cash flow targets, delivering 11% growth in 2025 and 38% growth in 2023.
Analysts tracking the TSX tech stock project free cash flow to expand from $2.3 billion in 2025 to $3.4 billion in 2030. If TELUS is priced at 10 times forward earnings, it could deliver 30% returns over the next four years. After adjusting for its tasty dividend yield, cumulative returns could be closer to 70%.
The bear case on TELUS starts and ends with debt. The net debt-to-EBITDA ratio is 3.4 times as of the end of 2025, which is elevated.
The company raised $7.3 billion in junior subordinated debt with 50% equity recognition last year.
It created Terrion, a wireless tower infrastructure company with the pension giant La Caisse, thereby cutting net debt by $1.3 billion in a single transaction. And management confirmed that TELUS does not need to access public debt markets until 2029.
The target is to lower the leverage ratio to 3.3 times by the end of 2026 and 3 times or better by 2027.
At 10.1%, the yield is historically high, and TELUS has paused its dividend growth program to focus on debt reduction. You get a fat yield today, but you will not receive the annual dividend hikes that TELUS shareholders enjoyed for more than a decade.
For long-term income investors who are comfortable waiting 12 to 18 months for the balance sheet to normalize, that trade-off is reasonable.
The Foolish takeaway
TELUS is not a stock for everyone right now, and I am not going to pretend otherwise.
But for patient, income-focused investors, buying a world-class fibre and wireless network at a 50% discount to its peak, with a 10% yield and free cash flow growing at 19%, could be a top investment decision.
