Is TELUS Stock a Buy for Its 6% Dividend Yield?

TELUS’s attractive 6% dividend yield and ongoing business transformation could offer patient investors an opportunity to benefit from income and a potential long-term recovery.

Jitendra Parashar

Author Bio Jitendra Parashar is a financial journalist who has been writing for The Motley Fool Canada since June 2020. With more than 13 years of experience in financial journalism, equity research, and market analysis, he helps investors understand market developments and identify long-term investment opportunities. Before joining The Motley Fool Canada, Jitendra spent several years at Market Realist covering U.S. equities, major economic developments, and developments in the automotive and technology industries. He also worked in commodity and currency research at brokerage firms, gaining insight into how economic trends, central bank decisions, and geopolitical events influence financial markets. Jitendra writes for beginner investors, dividend seekers, and Canadians looking to build wealth over the long term. He also contributes to the daily TSX Today series, explaining key Canadian market developments and highlighting news investors should watch. Based in India, Jitendra follows Canadian and U.S. markets closely. Outside of work, he enjoys travelling in the Himalayas, street and nature photography, and exploring programming and artificial intelligence. Education MBA in Finance and International Business Bachelor's degree in Journalism Areas of Expertise Canadian and U.S. financial markets, long-term equity investing, dividend investing, macroeconomic and geopolitical trends, automotive stocks, emerging technologies, and artificial intelligence. Social Media Profiles LinkedIn Muck Rack Favorite Investment Quote “Simplicity is the master key to financial success.” — John C. Bogle

Published November 13, 8:30 pm EST

TELUS (TSX: T) stock has been on my radar for quite some time, but its recent performance has made the investment decision more complicated than usual. After all, it’s difficult to ignore a Canadian telecom giant whose shares have lost roughly 40% of their value in a year.

For income-focused investors, however, that steep decline seems to have created an interesting situation. TELUS stock now offers a dividend yield of around 6%, which could look attractive to anyone seeking regular passive income.

But I believe there’s more to consider than the size of its payout. The company has been dealing with financial pressures, including elevated debt and weaker cash generation, while taking steps to improve efficiency and reshape its operations.

Let’s examine TELUS’s recent performance, dividend sustainability, and turnaround strategy to assess whether its 6% yield makes the stock worth buying on the TSX today.

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TELUS stock

Put simply, TELUS is a Vancouver-based communications giant that delivers mobile, internet, and other broadband services nationwide. Its operations also extend into healthcare technology and digital services.

After plunging 40% over the last year, TELUS stock currently trades at $12.42 per share with a market cap of $19.8 billion.

While the stock’s recent decline reflects concerns about earnings, cash flow, and debt, TELUS’s latest operating performance suggests that its core telecom business is beginning to stabilize.

Signs of stability beneath weaker earnings

TELUS’s latest earnings report deserves a closer look, as its headline numbers don’t fully show what’s happening within the business. In the third quarter ended in September, TELUS’s operating revenue slipped 1% year-over-year (YoY) to $5 billion, mainly as growth in its mobile network and fixed data services was offset by weaker TELUS Digital revenue.

The company also reported a net loss of $660 million compared to a $431 million profit a year ago. However, this loss largely reflected an $800 million non-cash impairment related to TELUS Health.

Similarly, adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) dipped 5% YoY to $1.8 billion.

On the brighter side, TELUS managed to add 84,000 net mobile phone customers during the quarter. Its mobile phone churn rate also improved to a three-year low of 1.01%, while average monthly revenue per mobile phone subscriber remained stable at $57.22.

These improvements suggest that TELUS’s efforts to retain customers and focus on profitable growth are gradually gaining momentum.

A 6% dividend backed by a changing strategy

Beyond these early signs of improving operations, TELUS is taking steps to make its attractive dividend more sustainable. The company recently confirmed a quarterly dividend of $0.1875 per share. This translates into an annualized dividend of $0.75 per share.

Although TELUS announced a dividend reset in July, that decision was part of its broader efforts to improve financial flexibility. In the latest quarter, its free cash flow declined 35% YoY, making stronger cash generation especially important for the company to regain investor confidence.

Meanwhile, TELUS aims to reduce its net debt-to-adjusted EBITDA ratio from 3.6 times to 3 times or lower by the end of 2028. To support this goal, it plans to monetize non-core businesses, with TELUS Health and TELUS Agriculture & Consumer Goods among its immediate priorities.

Why TELUS could reward patient investors

Notably, TELUS recently introduced a multi-year efficiency program targeting about $900 million in annualized cash savings by the end of 2028. It’s also expanding its PureFibre network and exploring opportunities in Canada’s growing artificial intelligence (AI) infrastructure market.

While elevated debt and weaker earnings remain concerns, TELUS is taking concrete steps to improve its financial health while investing in future growth. If these initiatives deliver the expected results, the combination of a 6% dividend yield and potential share price recovery could make TELUS stock a rewarding investment for patient, income-focused investors.