Telus (TSX: T) has been one of the most painful stories on the TSX this year. The blue-chip stock is down roughly 48% from its all-time high of $25.60, closing September 17 at just $12.47. For anyone who bought Telus for the dividend, the past few months have been brutal as the payout becomes unsustainable.
But the dividend cut is done and the stock has been repriced. The real question now is whether Telus is a bargain at these levels or a value trap waiting to catch more investors.
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What actually happened
On July 31, 2026, Telus reported its second-quarter results. Service revenue fell 1% to $4.4 billion. Adjusted EBITDA dropped 2% to $1.8 billion. The company reported a net loss of $1.8 billion, driven by a $2.1 billion non-cash goodwill impairment at Telus Digital.
But the key number for income investors was the dividend. Telus reset its quarterly payout from $0.42 per share to $0.19, a 55% cut. Annualized, that is $0.75 per share, down from $1.67.
Management also lowered full-year guidance. Free cash flow is now expected near $1.8 billion, down from an earlier estimate of $2.5 billion. The payout ratio target fell to 45%–60% of free cash flow, from 60%–75%.
Why the cut was necessary
The dividend cut surprised no one watching the balance sheet. Telus has been carrying roughly 3.5 times net-debt-to-adjusted-EBITDA, a leverage level that left little room for error. The company, along with BCE and Rogers, spent years building out fibre networks across Canada. That capital spending pushed debt higher just as competition intensified and subscriber growth slowed.
BCE cut its own dividend by more than 50% last year. Telus has now followed. The reset is expected to save approximately $2.7 billion in cumulative cash through 2028, money management plans to direct toward debt reduction.
The case for holding
There is still a real business underneath the wreckage. Telus owns one of Canada’s leading fibre-to-the-home networks, a growing mobility business, and early-stage exposure to sovereign AI data centres, assets Victor G. Dodig (CEO) has described as “difficult to replicate.”
Mobile network revenue actually grew 1% in the second quarter to $1.7 billion. The company added 17,000 mobile phone subscribers and 20,000 internet customers. Blended mobile phone churn was 1.1%, which is competitive.
Management is targeting at least 10% compounded annual free cash flow growth for 2027 and 2028. If that happens, the new dividend would be far more sustainable than the old one ever was.
The case for selling
The near-term picture is messy. Telus Digital, the division acquired for US$539 million in October 2025, is under pressure from AI-driven automation eating into legacy contracts. That triggered the $2.1 billion write-down. The company also lowered its full-year guidance.
Analyst sentiment is cautious. According to S&P Global, 18 analysts have a consensus rating of “Hold” on Telus, with an average price target of $14.78. That implies roughly 18% upside from current levels, but it is hardly a ringing endorsement.
My verdict: Hold
I rate Telus a hold right now. The dividend cut was painful, but it was also necessary. The company is now on a clearer path to repairing its balance sheet, and the new payout looks far more sustainable than the old one.
What I want to see before recommending fresh capital is evidence the turnaround is working. That means a couple of quarters of stable execution, particularly around Telus Digital and debt reduction. If free cash flow is growing and leverage is falling, the stock could look very different a year from now.
Foolish takeaway
Telus is not a broken company, just one in transition, and transitions are rarely smooth. The stock has fallen far enough that much of the bad news is already priced in, and the new dividend still offers a respectable yield for patient investors.
But patience is the key word. This is not a quick trade but a multi-year turnaround story, and there are no guarantees it will work. For income investors who need reliable cash flow today, there are safer options on the TSX. For those willing to wait and see whether Dodig’s plan delivers, holding Telus through the turbulence might be smarter.
