TELUS’s Yield Is Tempting, But This Rival Could Grow Your Income Faster

TELUS may still show a huge yield on some screens, but after its dividend cut the real story is reset income versus future dividend growth.

Amy Legate-Wolfe

Author Bio Amy became interested in investing in 2018 after having her first daughter. After receiving a masters degree in journalism from Western University, she became frustrated that the finance industry remained a confusing place for Canadians like her: new parents, millennials, and other young people who needed to understand their finances. Now, Amy focuses on tech companies and renewable energy for growth opportunities, coupling that with long-term investing strategies and equities. She also provides investors with a daily newsletter, Canada Stock Digest, for daily market updates. Her work can also be found at Canada's National Observer, where she writes on the business side of climate action. Before joining Motley Fool Canada, Amy wrote for major news organizations including HuffPost, CTVNews.ca, and CBC. When she’s not researching investing strategies, Amy’s time is pretty much monopolized by her two wild daughters, but in what little spare time she has she loves to do yoga, go on walks with her dog, and travel with her husband. Social Media Follow Amy on LinkedIn and Canada Stock Digest. Favorite Investment Quote “October: This is one of the particularly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” – Mark Twain

Published August 26, 10:30 am EDT

| More on: RCI.BT

Key Points

TELUS cut its dividend by 55%, so the forward yield is about 5.6% now, not a double-digit payout.
TELUS’ cut reflects weaker outlook and a push to reduce leverage, meaning dividend growth is paused and risk remains.
Rogers pays less today but has more free-cash-flow room to eventually grow the dividend once debt comes down.

A dividend screen can keep lying after the dividend itself has changed. TELUS (TSX: T) cut its quarterly payout by 55% on July 31. The declared rate is now $0.1875 quarterly, or $0.75 annually. At a recent price of $13.48, that produces a forward yield of approximately 5.6%. That’s still tempting, but investors comparing Canadian dividend stocks should separate today’s yield from tomorrow’s potential dividend growth.

dividend growth for passive income — Source: Getty Images

The reset

TELUS stock operates wireless and fibre networks alongside its Health and Digital businesses. Its core telecom operations remain valuable. During the second quarter, mobile network revenue increased by more than 1%, while the adjusted telecom earnings before interest, taxes, depreciation, and amortization (EBITDA) margin expanded by over one percentage point.

The wider company is having a harder time. Consolidated service revenue declined 1%, TELUS Digital revenue fell 10%, and Digital’s adjusted EBITDA dropped 19%. Management reduced its 2026 outlook, reset the dividend, and paused further dividend increases while working to reduce leverage from 3.5 times net debt to EBITDA.

TELUS stock trade below one $20 fair-value estimate, but that discount reflects weakening expectations rather than a routine market wobble. Competitive telecom pricing and possible structural pressure on TELUS Digital remain substantial risks. So, does that mean there’s another telecom that investors should take a look at?

Why Rogers could eventually grow faster

Rogers Communications (TSX: RCI.B) owns national wireless and cable networks, along with Sportsnet and major sports assets. Its second-quarter service revenue increased 8%, adjusted EBITDA rose 3%, and free cash flow grew 6% to $982 million.

Rogers stock expects $4.1 billion to $4.3 billion of free cash flow in 2026. Its $2 annual dividend requires roughly $1.08 billion based on the current share count, representing about one-quarter of the midpoint of that guidance. TELUS stock, by comparison, is targeting a 45% to 60% free-cash-flow payout ratio following its cut.

At approximately $50.67, Rogers stock trades for around 10.5 times forward earnings. The catch is leverage. Its debt ratio was still 3.8 times EBITDA in June. Rogers stock also plans to spend $4.35 billion buying the remaining 25% of Maple Leaf Sports & Entertainment before pursuing a minority asset sale.

Foolish takeaway

TELUS stock clearly produces more income today. Rogers stock starts approximately $162 behind on a $10,000 investment. The Rogers thesis is instead about capacity. Rising free cash flow and a comparatively modest payout could leave room for increases after management reduces debt.

COMPANY	RECENT PRICE	NUMBER OF SHARES	ANNUAL DIVIDEND	ANNUAL TOTAL PAYOUT	FREQUENCY	TOTAL INVESTMENT
T	$13.48	741	$0.75	$555.75	Quarterly	$9,988.68
RCI.B	$50.67	197	$2.00	$394.00	Quarterly	$9,981.99

Rogers stock hasn’t announced a dividend increase, and its payout has been unchanged for years. Investors shouldn’t treat unused capacity as a promise. Still, TELUS stock has explicitly paused increases after cutting its dividend, while Rogers stock appears to have more financial room to restart growth. For patient investors building a diversified portfolio, that could make Rogers stock the better income compounder, even though TELUS stock pays considerably more right now.