Telus Dividend Yield Hits 10% as Telecom Pressure Mounts, June 19

Telus stock has fallen sharply, pushing its dividend yield above 10% for the first time. The telecom giant paused its dividend growth program in December 2025 to reduce debt, signaling stress from aggressive wireless competition and lower customer revenue. Investors now question whether the 10%+ yield is sustainable or a red flag. With earnings down 12% year over year, the dividend story has shifted from growth to survival.

Why Telus Earnings Are Falling

Canada’s telecom sector faces one of its toughest competitive environments in years. Aggressive wireless promotions and price wars are squeezing revenue across the industry. Telus adjusted net income fell to $1.41 billion in 2025 from $1.55 billion in 2024. Adjusted earnings per share declined 12% year over year to $0.23 in the first quarter of 2026. Lower average revenue per user and compressed margins are making growth harder for all telecom companies.

Is the 10% Dividend Safe?

The market’s concerns pushed Telus stock lower, sending the dividend yield above 10%. Such a high yield raises questions about sustainability. Telus expects consolidated free cash flow of approximately $2.5 billion in 2026, representing about 10% growth from the prior year. Based on those projections, management estimates a dividend coverage ratio of roughly 75% of free cash flow. This level appears supported by cash generation, though the company maintains its quarterly dividend at $0.42 per share.

The AI Data Centre Bet

Telus is pivoting toward AI data centres to unlock next-level growth. However, investors remain skeptical due to significant capital expenditure requirements. The Magnificent Seven hyperscalers are spending hundreds of billions on AI infrastructure, dwarfing efforts by smaller telecom players. For Telus, the AI data centre business is still in its early stages and unlikely to be a near-term catalyst. The company continues to add customers and maintain strong subscriber retention, which supports its long-term investment case.

What This Means for Income Investors

Telus has returned approximately $25 billion in dividends since 2004, making it a blue-chip darling for dividend investors. The 10%+ yield is attractive, but the paused growth program signals management’s focus on debt reduction over shareholder returns. Investors should weigh the high income against the company’s compressed margins and competitive headwinds.

Final Thoughts

Telus’s 10%+ dividend yield reflects stock weakness, not strength. With earnings down 12% and free cash flow coverage at 75%, the dividend appears safe for now but growth is off the table. Income investors should view this as a value opportunity only if they accept no dividend increases.

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The content shared by Meyka AI PTY LTD is solely for research and informational purposes.  Meyka is not a financial advisory service, and the information provided should not be considered investment or trading advice.