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TELUS Stock Under Pressure: Dividend Concerns Drive 11% Decline
- Elias Zeekeh, MBA, CPA, CMA
- 23 hours ago
- 3 min read
TELUS shares have tumbled 10.98% over the past two weeks, dropping from C$20.68 to C$18.41 as of November 24, 2025. The selloff accelerated on November 18 when the stock plunged 5.28% following a critical analyst downgrade that questioned the sustainability of the company's attractive 8.8% dividend yield.
The Downgrade Catalyst
JPMorgan Chase analyst Sebastiano Petti cut TELUS to "underweight" from neutral on November 18, slashing the price target from C$22 to C$19. The downgrade centered on a stark warning: the company's dividend payout could exceed 100% of free cash flow through 2030, making the current distribution financially unsustainable. With a trailing twelve-month payout ratio already near 210% based on earnings, the market reacted swiftly to these concerns.[1][2][3]
Fundamental Challenges
TELUS's Q3 2025 earnings report on November 7 revealed underlying weakness despite management's optimistic framing. Consolidated revenues of C$5.1 billion were flat year-over-year and missed consensus estimates. Adjusted earnings per share fell 14% to C$0.24, missing analyst expectations by over 10%. The company faces pressure from declining mobile phone average revenue per user (ARPU) and intensifying competition from BCE and Rogers in wireless markets.[4][5][6][7][1]
Leverage remains a significant concern. TELUS's net debt-to-EBITDA ratio stood at 3.5x at quarter-end, above management's target of 3.0x by 2027. The company has issued over C$4.4 billion in debt securities this year to support deleveraging efforts, yet elevated capital expenditure requirements—approximately C$2.5 billion in 2025—continue to strain cash generation.[8][9][4]
The Dividend Dilemma
Management maintains confidence in its dividend strategy, projecting a payout ratio around 75% of free cash flow by year-end 2025. TELUS increased its quarterly dividend by 4% to C$0.4184 in November, continuing its tradition of annual increases. However, external analysts remain skeptical, particularly given the company's plan to eliminate its dividend reinvestment plan discount by 2027—currently saving approximately C$800 million annually.[10][1][4]
The market's concern is legitimate: TELUS must simultaneously maintain dividend growth, reduce leverage, and invest in network infrastructure to remain competitive. This three-way tension is unsustainable without meaningful improvements in free cash flow generation.
Investment Outlook
Trading at a 23.6x P/E ratio with a market capitalization of C$28 billion, TELUS faces a credibility test. The stock's decline has pushed the dividend yield to nearly 9%, pricing in significant risk of a dividend cut or policy revision. While National Bank upgraded TELUS to "outperform" post-downgrade, noting the company would likely adjust its dividend policy before cutting outright, consensus among analysts has shifted to "Hold" with limited upside.[3][11][12][1]
For income investors, TELUS presents a high-risk, high-reward proposition. The generous yield is attractive, but sustainability concerns are real. Investors should closely monitor quarterly free cash flow generation and management's progress on deleveraging targets. Until TELUS demonstrates it can balance its competing priorities, the stock's volatility will likely persist.
Disclaimer
This content is for informational and educational purposes only and does not constitute financial, investment, tax, or legal advice. You are responsible for your own investment decisions, and should consult a qualified professional who understands your individual circumstances before acting on any information presented here.
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1. https://www.theglobeandmail.com/business/article-telus-shares-fall-jp-morgan-downgrade-underweight/
9. https://www.telus.com/en/about/investor-relations/reports/annual-reports/2024/scorecard-and-targets
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