Every long-term investor owns a stock that tests their patience. For many Canadians, that stock is TELUS (TSX: T), which has grossly underperformed the broader markets over the past decade.
For years, TELUS was viewed as a blue-chip stock in part of a recession-resistant sector that paid investors a steady and growing dividend.
However, a debt-heavy balance sheet and slowing growth forced the Canadian telecom giant to lower its dividend payout in 2026.
Should you invest $5,000 in a dividend stock that is down 64% from all-time highs?
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Why TELUS stock hit the reset button in 2026
On July 31, Victor Dodig held his first earnings call as TELUS president and CEO as he took over after 11 years running CIBC.
- TELUS management initially forecast service revenue and adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) to grow 2% to 4% in 2026.
- It now expects revenue to be flat to down 2%, and adjusted EBITDA to be down 2% to 4%.
- TELUS Digital took a $2.1 billion noncash impairment, as AI is automating services like content moderation faster than expected.
- Free cash flow guidance for 2026 fell to about $1.8 billion from $2.45 billion.
Still, the core phone and internet business performed well. Mobile network revenue rose 1% in the second quarter, the third straight quarter of growth. Free cash flow came in at $545 million, up 2% year over year.
What the TELUS dividend cut means for income investors
TELUS cut its quarterly dividend to $0.19 a share starting October 1, down 55%. Management expects the dividend cut to increase free cash flow by $2.7 billion through 2028, which will be used to lower debt.
The dividend stock ended Q2 with a leverage ratio of 3.5 times and expects to lower it to 3 times over the next 18 months.
The new plan promises at least 10% yearly free cash flow growth in 2027 and 2028.
How to value TELUS stock using P/E and price to free cash flow
In this article, I try to value TELUS stock based on two ratios.
- The price-to-earnings (P/E) ratio compares the share price to profit per share.
- Price-to-free cash flow compares the company’s market value to the cash left after spending on the business.
TELUS trades at 16.7 times forward earnings, below the long-term average of 19 times. The tech stock also trades at 10 times forward FCF, below the average of 20.3 times.
Analysts forecast TELUS to expand adjusted earnings per share from $0.70 per share in 2026 to $1.31 per share in 2030. Over this period, FCF is forecast to expand from $1.85 billion to $2.6 billion.
What $5,000 in TELUS stock could be worth by 2029
A $5,000 investment in TELUS stock today will help you purchase 405 shares right now.
I used three simple cases. Each adds about $2.25 a share in dividends over three years, or roughly $911 on 405 shares.
- Bear case: Earnings stall near $0.80 and the P/E falls to its low of 13.8 times. So, TELUS stock could trade around $11 in late 2028, and your total TELUS investment will be worth $5,300 including dividends.
- Base case: Free cash flow reaches $2.4 billion and the multiple holds near 10 times. That puts the share price at about $15 in 2029, and your $5,000 at about $7,000.
- Bull case: Earnings could reach analyst estimates of $1.17. If priced at 16.7 earnings, it could trade at $19.60. So, TELUS stock could turn $5,000 into $9,000 over the next three years.
The compounded annual growth rate for TELUS is forecast at 2% in the bear case scenario. In the base case, the growth rate increases to 12%, while it is much higher at 21.6% in the bull case.
