Telus (TSX:T) has long been viewed as one of the better Canadian dividend stocks to own. However, that view has come into question recently as Telus just cut its dividend by 55%, ending its long-standing dividend-growth story. That’s forced some income investors to take a second look at the stock.
As a result, Telus now offers a quarterly dividend of just $0.1875 per share, down from $0.4184 per share. That lowers the annualized payout from $1.6736 to $0.75 per share. For income investors, that’s a sharp drop from a yield of just over 10% to approximately 5.60%.
Fortunately, the lower payout is still a competitive, if not generous yield, and that dividend can still provide a decent source of income for investors. That being said, the size of the actual reduction warrants a quick review of why Telus just cut its dividend and if the stock is still a good buy for investors.
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Why Telus just cut its dividend
Telus’s decision to cut its dividend isn’t something that management came up with overnight. Telus is one of Canada’s big telecom stocks, and the entire sector has been under growing pressure for several years.
Telecoms are capital-intensive businesses. They rely on financing to get the capital needed to upgrade and maintain their massive infrastructure. In recent years, higher interest rates have made those borrowing costs more expensive for telecoms.
This ultimately led to Telus’s big telecom peers cutting costs, and in some cases, slashing their dividends.
While Telus just cut its dividend, this latest move is the second shift by the company to rein in costs this year. In December 2025, Telus announced that it was pausing its dividend-growth program, which had called for annual increases of 3% to 8% through 2028.
Instead, the new policy has Telus targeting a payout ratio between 45% and 60% of trailing 12-month free cash flow.
The cash saved from the lower payout will allow Telus to shift focus to keeping costs and its debt under control. Management expects the dividend reset to retain approximately $2.7 billion in cumulative cash through the end of 2028.
What the new dividend looks like
While Telus just cut its dividend this month, investors will see that new reduced payout on October 1.
This means that an investor holding 100 Telus shares will see their quarterly dividend income fall from $41.84 to $18.75. On an annual basis, income from those same 100 shares will drop from $167.36 to $75.
That’s a significant decline for shareholders who were relying on Telus for income.
Fortunately, the new 5.60% yield is still higher than many other yields offered by established Canadian dividend stocks. And that dividend is still among the highest in the Canadian telecom field.
The new lower dividend should improve Telus’s financial position over the longer term, but it doesn’t eliminate the risks that Telus and the broader telecom sector still face.
Telus still has net debt of approximately 3.5 times adjusted EBITDA. Management is looking to reduce that ratio to three times or lower by the end of 2028.
The company is also facing pressure when it comes to competition from its peers. And those costs still need to be balanced against ongoing investment in the network infrastructure.
A reduced dividend gives Telus room to address those challenges, while still offering a competitive, but no longer growing dividend.
Should you buy Telus stock?
No stock is without risk, and that includes otherwise defensive investments like Telus. The company’s dividend cut shows investors why diversification is so important.
Overall, Telus’s move to a more sustainable dividend is good for the long-term health of the company. Telus retains more cash, reduces pressure on its balance sheet, and can direct more money towards paying down debt.
If Telus can pull that off, that makes Telus and its 5.6% dividend yield a compelling option to hold for the long term.
