The Toronto Stock Exchange (TSX) has performed remarkably well in 2026, notwithstanding global headwinds and war anxiety. Only 2 of 11 primary sectors, technology (-6.6%) and communications services (-4.5%), have posted negative returns as of this writing. Yet, while the high-growth tech sector has gained tremendously over the last three months, telcos continue to struggle.
TELUS (TSX: T) is among the hard-luck constituents in Canada’s telecom sector. However, despite the 24% drop to $14.55 since hitting $19.25 in November 2025, income-focused investors would rather keep the 5G stock or buy more shares than sell. Its 11.5% dividend yield more than compensates for the temporary weakness. The sector-wide slump could take longer, but don’t count out a long-term recovery.
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Stable financial performance
In Q1 2026, net income declined 52% to $144 million versus Q1 2025, while free cash flow (FCF) rose 19% year-over-year to $583 million. According to Darren Entwistle, President and CEO of TELUS, the quarterly results reflect the business’s enduring resiliency. He also credits the compelling strength of TELUS’s portfolio of services.
The sustained demand for premium bundled services nationwide led to a first-quarter total growth in Mobile and Fixed customers of 262,000. As of March 31, 2026, the 5G network covers 33.4 million Canadians, which is over 90% of the population. For Doug French, Executive Vice-President and Chief Financial Officer of TELUS, the FCF growth and $1 billion cash from operations during the quarter indicate a solid financial foundation.
Diversified revenue sources
The $22.7 telecommunications company has multiple revenue sources. TELUS technology solutions (TTech), where mobile products and services belong, is the lead contributor. The heightened promotional activity and elevated customer switching in Q1 2026 resulted in 26.3% year-over-year mobile phone growth to 428,000.
TELUS Health, through its electronic medical records solutions, provides recurring revenue. It is now generating over $2 billion in annual revenue. This business segment covered 169.6 million Healthcare lives, representing a 121.7% increase from a year ago. TELUS Digital is the global technology and digital services arm of the company. Its Artificial Intelligence (AI) Data Solutions caters to big tech companies and enterprises.
Total capital expenditures in communities across Canada during the quarter reached $651 million. TELUS has spent over $59 billion beginning in 2000. Since 2004, the telco giant has paid approximately $25 billion in dividends and repurchased $5.3 billion worth of shares. This track record confirms that T remains a top buy-and-hold candidate.
Pressing challenges
The wireless market has become ultra-competitive, characterized by aggressive discounting and promotional price wars. In addition to the intense price environment, TELUS needs to contend with a total debt of $31.1 billion.
Management targets a leverage ratio of 3.3 times or lower and 3 times or better by year-end 2026 and 2027, respectively. A silver lining is that TELUS doesn’t need to take on additional public debt until 2029.
During the earnings call in May 2026, TELUS announced it was pursuing a $7 billion asset monetization program. French added a $2.5 billion FCF target for 2026 and a minimum 10% compounded annual growth rate through 2028, supported by EBITDA growth and a moderation in capital expenditure intensity, among other factors.
Long-term play
Skip TELUS if you’re expecting a quick turnaround. The large-cap stock is a long-term value and income play. There’s heavy pressure ahead, although the company appears to have a clear roadmap to full recovery. Meanwhile, the quarterly income stream should be intact.
