Investors seeking dividend stocks with an attractive yield for a Tax-Free Savings Account (TFSA) could consider Telus (TSX: T). The Canadian telecommunications giant has faced significant market pressure, with its shares down more than 39% over the past year and trading near their 52-week low.
That steep decline reflects concerns around intensifying competition and management’s decision to cut its dividend.
At current prices, Telus offers a dividend yield of roughly 5.6%. Moreover, the rest has made the dividend more sustainable. Also, the stock price appears to be right after the recent weakness and offers an attractive entry point for TFSA investors with a long-term outlook. Let’s take a closer look.
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Telus cuts its dividend to sustain payouts and strengthen the balance sheet
Telus’s about 55% dividend reduction to about $0.19 per share, or approximately $0.75 annually, is a significant setback for income-focused shareholders. However, investors should view the decision primarily as a balance-sheet and capital-allocation reset to make its payouts more sustainable.
Canada’s telecom sector faces structural pressures from intense price competition, slower subscriber growth, regulatory constraints, and a slowing population growth rate. Telus’s earnings trajectory reflects these challenges. Its adjusted net income declined from $1.55 billion in 2024 to $1.41 billion in 2025, followed by a further 26% year-over-year decline in the second quarter of 2026.
Against this backdrop, preserving cash and reducing leverage are increasingly important. Telus ended the second quarter with net debt at roughly 3.5 times adjusted EBITDA. Management now aims to reduce leverage to approximately three times or lower by the end of 2028.
The dividend reset could accelerate that deleveraging. Management expects the lower payout to conserve approximately $2.7 billion in cumulative cash through 2028, with the savings primarily directed toward debt reduction. Lower leverage could strengthen financial resilience and provide greater flexibility to fund network investment and future growth initiatives.
Equally important is Telus’s revised dividend policy. The company now targets a payout ratio of 45%–60% of trailing 12-month free cash flow, versus 60%–75% previously. This lower payout range provides a larger cash buffer and makes the dividend more sustainable.
Here’s what TFSA investors could do
For TFSA investors, Telus stock presents a compelling income-and-recovery opportunity despite its dividend reduction. The dividend cut lowers near-term income but improves financial flexibility, allowing the company to prioritize debt reduction, free cash flow generation, and more disciplined capital allocation.
Telus is also monetizing non-core assets, which could provide additional balance-sheet support. Operationally, continued customer growth and strong subscriber retention will likely support its business. Meanwhile, cost-transformation initiatives that aim to improve efficiency, the use of technology, and the concentration of resources on higher-return opportunities augur well for long-term growth.
Telus is now focused on allocating capital to areas where it has stronger competitive advantages and notable return potential, including wireless, PureFibre, and digital and AI infrastructure. Moreover, lower capital intensity and a more sustainable payout ratio should also improve dividend resilience over time.
With the shares having declined significantly, valuation and yield look compelling. TFSA investors with a long-term outlook could gradually start accumulating Telus stock to benefit from capital appreciation alongside tax-free dividend income.
