For years, Telus (TSX: T) was the stock Canadian income investors could buy and forget. A blue-chip giant, the telecom behemoth raised its annual dividend from $0.20 per share in 2005 to $1.67 per share in 2026.
Today, the TSX dividend stock trades 65% below all-time highs. So is Telus stock a bargain hiding in plain sight, or a value trap with a 6.8% dividend yield?
Source: Getty Images
How Telus stock went from TSX dividend darling to fallen giant
Over the past decade, Telus has spent billions building its PureFibre and 5G network. It also branched into verticals such as healthcare and agriculture, and outsourced digital services through TELUS Digital.
A significant portion of these expenditures was funded with debt. Meanwhile, the dividend kept climbing and was soon unsustainable amid a backdrop of rising interest rates.
Further, lower immigration shrank the pool of new phone and internet customers for every Canadian carrier. And artificial intelligence began replacing some of TELUS Digital’s older services, like content moderation, faster than management expected.
Why this TSX dividend stock finally cut its payout
Victor Dodig, the former CIBC chief who became Telus CEO on July 1, used his first earnings call to reset expectations.
Starting October 1, the quarterly dividend drops to $0.19 per share or $0.75 per year, a 55% cut. Telus also scrapped the discount on its dividend reinvestment plan.
Telus carries net debt of about 3.5 times adjusted EBITDA (earnings before interest, tax, depreciation, and amortization). In plain terms, it owes roughly three and a half years of operating profit.
The new goal is to end 2028 with a leverage ratio below three times. The dividend cut should lower dividend expense by $2.7 billion, which it will use to reduce debt.
- Telus booked a $2.1 billion noncash write-down on TELUS Digital.
- Full-year EBITDA guidance flipped from 2%–4% growth to a 2%–4% decline.
- Free cash flow guidance also fell from $2.5 billion to about $1.8 billion.
“I recognize the large reset that kind of was presented to you all this morning. I see it as a bit of an abbreviated detour. And I say abbreviated because we’re going to work pretty intensely in course correcting and transforming our company over the next little while,” Dodig told analysts.
The bull case for Telus stock as one of the top Canadian stocks again
Under the noise, the core telecom business is holding up better than the headlines suggest.
Mobile network revenue grew 1% in the second quarter, the third straight quarter of growth. Average revenue per user still slipped, but by less than 0.5%, and that decline has narrowed for five quarters running. CFO Gopi Chande also said price wars across the industry appear to be cooling.
Telus is marketing parts of TELUS Health and some real estate. Last year, it sold 49.9% of its tower business, Terrion, to La Caisse for $1.3 billion.
At about $12, the new dividend yields over 6%. The new payout target of 45% to 60% of free cash flow also leaves a much bigger safety cushion than before.
TELUS Digital could keep shrinking as clients automate with AI. Capital spending is rising to about $2.6 billion this year, up from the $2.3 billion originally planned. And the debt target has already slipped a year, from 2027 to 2028.
Telus stock verdict: Buy, sell, or hold among TSX stocks in late 2026?
Patience is key for new Telus stock investors. You can start with a small position and add more if the November update shows cost savings and lower debt. Telus has to earn back investor trust one quarter at a time.
