Weak signal?

Investment implications of the dividend cut at TELUS

The bad news just keeps coming for Canadian telecom companies. This time it was TELUS Corp. (TSX: T) that delivered the painful blow to investors.

On July 31, the company announced in its second-quarter report that it is slashing its dividend by 55%. Analysts had been expecting a cut, but not of this magnitude. The new rate will be $0.1875 per quarter ($0.75 per year) compared with $0.4175 ($1.67 per year) previously.

The company said the move is expected to generate approximately $2.7 billion in cumulative cash savings through 2028. The money will be directed toward debt reduction.

“The actions we are taking establish the financial conditions for strong, profitable growth and durable, compounding free cash flow growth,” said Gopi Chande, the company’s Chief Financial Officer.

“In combination, the dividend reset, termination of the DRIP discount and proceeds from our monetization initiatives provide a path to achieve our leverage and free cash flow objectives. Our commitment to reducing capital intensity, combined with a disciplined focus on operational efficiency across the business, reinforce that path further. The strategic changes we are making to how this company generates and deploys cash will compound to create lasting value for our shareholders.”

The share price, which opened the year at around $18 but has drifted steadily down since, fell yet again. It closed recently at $12.56. The shares yield 6.0% at the new dividend rate.

The move comes less than 15 months after competitor BCE cut its payout by roughly the same percentage.

CEO Victor Dodig said TELUS will focus on three near-term strategic financial and operational priorities to improve performance and capital allocation going forward. These include strengthening the financial foundation by honing operational discipline, reinvesting in the core business, and deploying resources to drive sustainable growth.

There was no specific reference to spinning off assets, which was one of the company’s apparent priorities until recently. It was widely assumed that TELUS Health, a digital health division of the company that provides virtual care, employee assistance programs, and electronic medical records across Canada and internationally, was being primed to become a standalone operation in the near future.

But the bitter experience of the company’s 2021 IPO launch of TELUS International has soured some investors on that idea. International’s stock never gained traction as a separate company and in September 2025 TELUS paid US$539 million to reacquire all the shares it didn’t own and fold what was by then known as TELUS Digital back into the parent company.

That’s not to say that another TELUS spinoff won’t happen. But not soon. The focus now is on basics: reducing costs, improving the balance sheet, and creating sustainable growth.

RBC Capital Markets responded to the news by cutting its ranking on the stock to Sector Perform with a target of $15 and downside potential of $11.

“We got it wrong,” RBC said in a note to clients. “We are downgrading the stock…and we will look for more attractive and/or timely entry points.”

Investment implications

So, does all this suggest that the stock is now at rock bottom and it’s time to buy? I wouldn’t recommend it. As we saw with BCE, even a major dividend cut doesn’t guarantee share price stability. BCE shares are down about 13% since their high for the year in early March. That’s not exactly a ringing endorsement of its dividend cut or BCE’s current direction.

The same thing could happen with TELUS.

The RBC research note says that in an unfavourable scenario we could see TELUS shares drop to the $11 range. That suggests that if you’re on the sidelines now, you should stay there, at least until such time as it’s apparent the share price has stabilized.

If you own TELUS shares, you have two choices at this stage.

1. Hold: The reduced dividend means the stock offers a yield of 6.0% at the current price. If you are content with that cash flow, hold your position, collect the dividend (which should be safe at this point), and hope for a gradual improvement in the trading price.

2. Sell. As BCE has shown, share prices don’t necessarily rebound quickly after a dividend cut. If you’re looking for capital gains, this is not the place to find them, at least not in the near future. Take the loss and use the money elsewhere.

Gordon Pape is one of Canada’s best-known personal finance commentators and investment experts. He is the publisher of The Internet Wealth Builder and The Income Investor newsletters, which are available through the Building Wealth website.

Follow Gordon Pape on X at X.com/GPUpdates and on Facebook at www.facebook.com/GordonPapeMoney.

For more information and details on how to subscribe to Gordon’s newsletters, go to www.buildingwealth.ca/subscribe.

Notes and Disclaimer

Content © 2026 by Gordon Pape Enterprises. All rights reserved. Reprinted with permission. The foregoing is for general information purposes only and is the opinion of the writer. Securities mentioned carry risk of loss, and no guarantee of performance is made or implied. This information is not intended to provide specific personalized advice including, without limitation, investment, financial, legal, accounting, or tax advice. Always seek advice from your own financial advisor before making investment decisions.

Image: iStock.com/Manuel-F-O