Is Telus’s Dividend Still Worth Counting On?

Telus (TSX:T) stock is a very popular one among Canadian dividend investors. Known for its massive 11.3% dividend yield, the stock’s payout is quite legitimate if it can be maintained.

The question is, can it be maintained?

Early in 2025, BCE Inc (TSX:BCE) looked a lot like Telus does today. It had a 12% dividend yield, it had been raising its payouts, it was growing its subscriber base. But then one day the company put out an earnings release, basically stating that it didn’t think its future earnings could support the dividend, and then slashed the dividend by more than half. BCE investors responding by sending the stock plummeting. BCE still has not recovered from the sel-loff.

Now, why mention this whole BCE soap opera when the topic of this article is Telus?

Quite simply, because Telus strongly resembles what BCE looked like at the start of its woes. The stock has a $1.67 annual dividend that produces an 11.1% yield; its dividend has been increasing; and it has delivered middling or even negative earnings growth over the last one- and three-year periods. These facts all speak to an organization at risk of a dividend cut, and given the dividend preference that Canadian investors are known to demonstrate, probably capital losses as well. In this article, I explain why I think Telus stock is likely not the deal many think it is.

Little growth or pricing power

Telus appears to have few characteristics of a dominant business that has the ability to raise prices and enjoy growing earnings in perpetuity. While the Canadian telecommunications sector is notoriously protected from outside competition, the big players have nevertheless been competing with each other on price. For example, Quebecor’s Freedom Mobile has reportedly been undercutting Telus and BCE in key markets. This fact creates an uncomfortable situation for Canadians. As consumers, Canadians pay more for cellular and internet service than do people in other markets. As investors, we don’t enjoy the benefit of a truly dominant telco that can be counted on to thrive and produce growing dividends forever. Telus is if anything one of the weaker players in this space. So, I don’t think its dividend is reliable.

Dividend potential if all goes well

Despite the issues I highlighted, Telus would indeed produce a real geyser of dividend income were it to turn its ship around. The stock pays a dividend of $0.42 per quarter, which works out to about $1.67 per year. At today’s stock price of $15.08, the yield is 11.1%. That could produce $5,500 per year with $50,000 invested! See the math below.

So obviously, the dividend potential here in a “best-case scenario” is remarkable. With hundreds of thousands invested, you could pretty much live off a “bizarro Telus” that was not exposed to any of the risk factors Telus is, in fact, exposed to. Unfortunately, those risks are very real, so I’m not buying Telus stock.