Down 41% and Still Yielding 5.6%: 1 Canadian Stock I’d Snap Up

Telus stock has fallen 41%, but its 5.6% yield and aggressive debt-reduction strategy could make today’s discounted price worth a closer look.

Key Points
  • Telus stock has tanked by roughly 41% over the last year to currently trade at $13.41 per share.
  • The Canadian telecom giant still offers an annualized dividend yield of about 5.6% after resetting its payout.
  • Telus expects the dividend reset to generate about $2.7 billion in cumulative cash savings through 2028 to support debt reduction.

Telus (TSX: T) may not look like an obvious bargain after falling 41% over the past year to $13.41, but that’s exactly what makes the shares of this Canadian telecom giant interesting right now. Investors are understandably cautious after its disappointing second-quarter results, reduced 2026 guidance, and a 55% dividend reset. However, that lower dividend should save Telus roughly $2.7 billion through 2028, giving the company greater flexibility to reduce debt and strengthen its balance sheet. And even after the reset, the shares still offer an annualized yield of about 5.6%.

Here’s why Telus could be an attractive buying opportunity on the TSX today while investor sentiment remains subdued.

how to save money

Source: Getty Images

Telus stock

After falling sharply over the last year, Telus stock currently trades at $13.41 per share with a market cap of about $21.3 billion. With this, the stock is now just 4% above its 52-week low. Despite its recent dividend reset, Telus still offers an annualized yield of roughly 5.6% at the current market price.

Of course, investors did not push the stock down this far without reason, as Telus has been facing aggressive promotional pricing in wireless, while slower population growth has weakened its subscriber demand. Pressure at Telus Digital and elevated leverage have added to investors’ concerns.

Its latest financial results clearly reflected some of those challenges. In the second quarter, Telus’s operating revenue and other income fell 3% year over year (YoY) to about $4.9 billion. Consolidated service revenue slipped 1%, mainly due to weaker Telus Digital revenue, lower mobile average revenue per user, and declining legacy voice revenue.

Similarly, its adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) dropped by 2% YoY to about $1.8 billion.

However, not everything moved in the wrong direction for Telus in the latest quarter, as it generated about $1.3 billion in cash from operating activities, up 15% YoY. The company’s free cash flow also climbed 2% from a year ago to $545 million. On top of that, its telecom subscriber base grew 6% over the previous 12 months to 17.9 million connections.

Why the selloff could create an opportunity

For investors willing to look past Telus’s near-term challenges, its balance-sheet strategy makes this beaten-down stock attractive.

Reducing leverage is now one of the company’s biggest priorities. Telus ended the second quarter with a net debt-to-adjusted EBITDA ratio of 3.5 times. And the telecom giant wants to bring that figure down to roughly three times or lower by the end of 2028.

Moreover, Telus’s controversial dividend reset should help it get there. If you don’t know it already, the company recently reduced its quarterly dividend by 55% to $0.1875 per share, bringing the annualized payout to $0.75. While that is painful for existing income investors, the company expects the change to generate about $2.7 billion in cumulative cash savings through 2028. Those savings are expected to go toward debt reduction.

That is not the only step Telus is taking. The company is also reviewing non-core assets, including Telus Health-related assets and real estate, with proceeds from potential monetizations also intended for deleveraging. At the same time, Telus expects capital intensity to decline over the multi-year horizon as its PureFibre network build approaches completion.

Still, investors should keep their expectations realistic as Telus recently lowered its 2026 free cash flow guidance to about $1.8 billion and now expects adjusted EBITDA to decline between 2% and 4%. Simply put, this is unlikely to be an overnight turnaround.

But Telus’s 41% decline has already reflected plenty of that pessimism. If the company can consistently reduce leverage, improve fundamentals, grow free cash flow, and keep its core wireless and fibre businesses strong, it can see a handsome recovery in the years to come.

Fool contributor Jitendra Parashar has no position in any of the stocks mentioned. The Motley Fool recommends TELUS. The Motley Fool has a disclosure policy.

More on Dividend Stocks

woman looks ahead of her over water
Dividend Stocks

TFSA Retirement Plan: 2 Dividend Stocks Paying Nearly 6% Annually for Tax-Free Passive Income

These industry leaders now offer attractive dividend yields.

Read more »

middle-aged couple work together on laptop
Dividend Stocks

How I’d Build a $250-a-Month Income Plan Without Chasing the Biggest Yields

A roughly $75,000 portfolio can supply $250 a month on average without relying on unusually high yields.

Read more »

golden sunset in crude oil refinery with pipeline system
Dividend Stocks

Enbridge vs. TC Energy: Which Pipeline Stock Is the Better Buy Going Into 2027?

Let’s evaluate Enbridge and TC Energy across historical returns, growth prospects, dividend track records, and valuation to determine which pipeline…

Read more »

dividends grow over time
Dividend Stocks

How to Structure a $20,000 TFSA for Lifelong Monthly Income

These TSX stocks offer high yields and distribute monthly dividend payouts. Sustainable payouts generate steady income.

Read more »

Blocks conceptualizing Canada's Tax Free Savings Account
Dividend Stocks

How to Use Your TFSA to Average $408.75 per Month in Tax-Free Passive Income

This strategy can lower risk while also boosting yield.

Read more »

some investments are riskier than others
Dividend Stocks

Manulife vs. Sun Life: Which Stock Makes More Sense for a Retirement TFSA?

Sun Life offers slightly more starting income, while both insurers bring growth opportunities and market-sensitive risks.

Read more »

dividend stocks are a good way to earn passive income
Dividend Stocks

Starting With $25,000: How I’d Build Towards $500 a Month in Dividends

A $25,000 starting portfolio can become a useful income engine, with contributions doing more of the work than a giant…

Read more »

A series of red ladders lead to successively higher levels
Dividend Stocks

Higher Rates Are Back: Can Brookfield Infrastructure Keep Growing Its Payout?

Brookfield Infrastructure's growing cash earnings support its payout, with financing costs setting the pace of the next increase.

Read more »