Telus hits pause on dividend increases, expects free cash flow to grow

Telus Corp. is hitting pause on its dividend growth plan until it says its share price reflects its growth prospects.

The company said Wednesday it will continue to pay a quarterly dividend of 41.84 cents per share. The current payment gives it an annual yield of nearly 9.2 per cent, based on its share price Tuesday.

Telus also said next year it will begin phasing out its discounted dividend reinvestment plan, which allows shareholders to use their dividends to buy Telus shares from the company at a discount to the market price.

The company plans to reduce the current discount of two per cent to 1.75 per cent for dividends declared in February and May 2026 and 1.5 per cent for dividends declared in August and November 2026. The discount will be one per cent for dividends declared in 2027 and there will be no discount starting in 2028.

“Telus is advancing its capital allocation strategy, supported by strong business fundamentals and significant free cash flow generation,” said Telus president and CEO Darren Entwistle in a press release.

Telecom analysts reacted favourably to the announcement, with Scotiabank’s Maher Yaghi saying it “falls in line with how we believe the dividend should be handled.”

“Overall these decisions are what long-term shareholders have been urging the company to undertake and show a more determined action plan by management to stabilize the balance sheet, reduce share dilution, bring the payout ratio well below 100 per cent in order to return to (free cash flow and) share growth.”

Drew McReynolds of RBC Capital Markets said the pause in dividend growth and additional dividend reinvestment plan discount would be “positive for the stock at current levels.”

“To be clear, we are proponents of Telus pausing annual dividend growth pending a decline in its cost of equity and pending better visibility on industry revenue growth … as well as to provide some additional cushion to navigate any unforeseen regulatory change, macro headwind and/or any prolonged period of minimal population growth in Canada,” McReynolds said in a note.

Telus’ stock was trading at $18.61 midday Wednesday, up 34 cents or around 1.9 per cent.

The company expects to generate about $2.15 billion in free cash flow in 2025 and forecasts a compounded annual growth rate of at least 10 per cent from 2026 through 2028.

It said its preliminary target for free cash flow for 2026 is $2.4 billion, with a capital expenditure target of about $2.3 billion.

“These actions will be augmented by a range of opportunities that we are actively pursuing, including a strategic partner for Telus Health and accelerated monetization of considerable real estate and copper assets,” said Entwistle.

Earlier this year, rival BCE Inc. cut its quarterly dividend payment to shareholders for the first time in 17 years.

Its CEO Mirko Bibic said in May the company cut its dividend as it faced intense price competition and sustained regulatory uncertainty, along with a backdrop of macroeconomic and geopolitical instability.

BCE has since continued to pay a quarterly dividend of 43.75 cents per share, down from 99.75 cents per share before the cut.

Karl Berger, a senior wealth consultant at Cidel Asset Management Inc., said dividends can play a role in the total return expected from a company’s stock, “and this is particularly true of telecoms over the past number of decades.”

“If any company isn’t generating enough free cash flow to grow their dividends consistently (let alone simply cover them) then most investors should have little interest in owning the stock, no matter how ‘attractive’ the dividend yield appears to be,” Berger said in an email.

He noted that cutting a dividend can sometimes help a company grow its stock price in cases where investors believe the management team is doing the appropriate thing to preserve cash flow.

“That appears to perhaps be the case with BCE, whose stock is modestly higher since the spring dividend cut (which was described as ‘much needed’ in some circles), though it could simply be representative of a stock that was oversold for its appropriate metrics,” said Berger.

“Telus’ actions may very well be perceived as appropriate by some investors, while the lack of near-term future dividend increases will eliminate some investors that are acutely focused on dividend growth.”

This report by The Canadian Press was first published Dec. 3, 2025.

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Sammy Hudes, The Canadian Press