In a significant strategic shift, Canadian telecommunications giant Telus Corp. has announced it will pause future dividend increases. The move is a direct response to mounting pressure from investors concerned about the company's debt levels and its recent stock performance.
Investor Pressure and Stock Performance
The decision comes as Telus shares have tumbled 19 per cent over the past three months. This sharp decline has pushed the company's dividend yield above nine per cent, a level that raised red flags among market analysts. Many began questioning Telus's growth trajectory and overall investment strategy.
Last month, analysts at JPMorgan Chase & Co. downgraded Telus shares to an "underweight" rating. In their assessment, they bluntly stated that the company's dividend growth model was "unsustainable" given the current financial climate and operational challenges.
A Pause on Payouts and a New Leverage Target
Telus has stated it will hold its quarterly dividend steady at 41.84 Canadian cents per share. The company indicated this freeze will remain in place "until such time as our share price and associated dividend yield better reflects the considerable growth prospects of Telus."
Concurrently, the Vancouver-based telecom has set a clear financial target. It aims to reduce its leverage ratio to 3.3 times earnings before interest, taxes, depreciation, and amortization (EBITDA) by the end of 2025. This is a reduction from the 3.5 times ratio it reported at the end of September this year.
Industry Context and Broader Challenges
Telus is not alone in facing these difficult decisions. Its major rival, BCE Inc., slashed its dividend by more than half earlier in 2025. This trend highlights the broader pressures on Canada's telecommunications sector, which is grappling with intense competition, high capital expenditures for network upgrades, and evolving consumer demands.
The company's announcement represents a pivotal moment, prioritizing balance sheet strength and long-term stability over immediate shareholder returns via dividend growth. Investors and market watchers will now closely monitor Telus's progress in reducing debt and reigniting its share price performance.
