Telus (TSX:T) had been one of the top dividend payers on the TSX, supported by a history of dividend increases. That investment thesis changed in 2025, when the company paused dividend growth before ultimately reducing its quarterly payout by about 55% to $0.19 per share. The cut is a setback for income investors, and reflects a broader shift in Telus’s financial strategy.
Rather than continuing to prioritize dividend growth, Telus is now focusing on strengthening its balance sheet, reducing debt and creating greater financial flexibility.
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Why did Telus cut its dividend?
The dividend reduction reflects growing pressure on Telus’s earnings and cash flow. In December 2025, management suspended its dividend-growth program and maintained the quarterly dividend at $0.42 per share. That decision signaled that the company was becoming more cautious about its payouts.
The pressure has since intensified. Telus operates in a highly competitive Canadian telecommunications market, where aggressive pricing, moderating population growth, and regulatory challenges are making profitable growth more difficult.
Telus’s financial performance illustrates the problem. Its adjusted net income declined to $1.41 billion in 2025 from $1.55 billion in 2024. The weakness continued into 2026, with adjusted net income falling 26% year over year in the second quarter.
With earnings under pressure and leverage elevated, the dividend cut can help Telus retain more cash to lower debt and strengthen its financial position.
Does the dividend cut make Telus a better investment?
For existing shareholders, the reduction is clearly negative from an income perspective. However, the change could improve Telus’s financial position over time. The company ended the second quarter with net debt of approximately 3.5 times adjusted EBITDA, a relatively high level of leverage for a business facing challenges.
Management is targeting leverage of roughly three times adjusted EBITDA or lower by the end of 2028. Telus estimates that the lower payout will generate approximately $2.7 billion in savings through 2028, which can be used to reduce debt.
A stronger balance sheet would give Telus greater capacity to invest in its network and pursue growth opportunities when conditions improve.
The company has also adopted a more conservative dividend policy. Telus now targets a payout ratio of 45% to 60% of trailing 12-month free cash flow, down from its previous target of 60% to 75%. This lower payout range appears more sustainable.
The bottom line
Telus is no longer the dividend-growth investment it once was. The 55% dividend cut marks a major shift in its capital-allocation strategy and makes the stock less attractive to investors focused mainly on growing income.
That said, the reset should strengthen its balance sheet and support a more sustainable payout ratio.
Telus is now directing capital toward areas where it has stronger competitive advantages and higher return potential. The company is also monetizing non-core assets, creating additional funds to reduce debt. Meanwhile, continued customer growth and strong subscriber retention offer some stability to the core business.
Lower capital spending should also support free cash flow and give management greater financial flexibility.
Overall, the lower dividend obligation, reduced capital spending, sustainable payout ratio, and decline in its share price make Telus stock a buy.
