The Vancouver headquarters of Telus Corp., which on Wednesday said it would deviate from its previous plan to continue raising its dividend payout.DARRYL DYCK/The Canadian Press
Telus Corp. T-T is pausing its dividend growth as part of an effort to reduce its leverage, an abrupt change from its previous payout plans after investors and analysts questioned the company’s ability to keep increasing dividends while meeting debt-reduction targets.
Telus said it will not increase its dividend and keep its quarterly payout at its current level until its share price “reflects growth prospects,” the telecom company said Wednesday.
The pause represents an about-face from just two weeks ago, when the company insisted that it would continue with plans to grow its dividend.
On Nov. 20, Telus chief financial officer Doug French told The Globe and Mail that management did not expect changes to the dividend-growth plan, “and management does not plan to change that, as nothing has changed in our operations.”
He also noted, however, that as with other public companies, Telus dividend decisions are ultimately made by the board of directors, which reviews the payout on a quarterly basis. The company’s financial documents also contain warnings that the growth could end at any time.
In an e-mail Wednesday afternoon, Telus spokesperson Steve Beisswanger said that Mr. French’s comments were based on the company’s third-quarter financial results and disclosure materials, and noted that management and the board regularly review the company’s capital-allocation strategy.
“As outlined in our news release today, considering the current dividend yield, Telus believed that a dividend-growth pause was prudent at this time until the share price better reflects the growth prospects of the business,” he said.
“Importantly, our intention is to continue paying the dividend at its current nominal level. These decisions reflect our ongoing commitment to financial discipline and long-term shareholder value,” he added.
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Telus and other Canadian telecom companies have faced growing pressure to take steps to reduce heavy debt loads, amid slower growth across the sector in part because of reduced immigration.
In recent weeks, some analysts argued that Telus’s plans to continue increasing the dividend were unsustainable given their estimates of the company’s cash flows, as investors questioned Telus’s ability to keep increasing dividends while meeting debt-reduction targets.
The company’s executives maintained that it could continue to cover the dividend while also working toward meeting the company’s leverage targets.
Now, the company will continue to pay its quarterly dividend at the most recent level of 41.84 cents per share, “until such time as our share price and associated dividend yield better reflects the considerable growth prospects of Telus,” chief executive officer Darren Entwistle said in a Wednesday release.
On Nov. 20, Mr. French said the company expects to end 2025 with a cash-flow payout ratio of about 75 per cent, and to remain close to that ratio in the coming years.
However, analysts from J.P. Morgan and Veritas Investment Research calculated the figures differently, saying they viewed that ratio as remaining above 100 per cent for the next few years.
Telus shares are near their lowest point for nearly a decade.
The company’s share price has suffered a 46-per-cent slide since 2022 highs and remains down 15.8 per cent from this time last year. However, the stock jumped slightly on Wednesday, closing up 1.5 per cent on the Toronto Stock Exchange with a yield of about 9.1 per cent.
Telus’s decision to pause dividend increases is expected to end pressure on the stock price from short selling by investors such as hedge funds. Short sellers borrow stock and sell it on the expectation of repurchasing the shares at a lower price and making a profit.
Short sales of Telus jumped in recent months.
In the first two weeks of November, the most recent period on record, regulatory filings show short sales of Telus on the TSX increased by 1.1 million shares to 50.4 million or approximately 3 per cent of the telecom’s outstanding shares.
Telus also trades on the New York Stock Exchange and the short position there rose by 14 per cent to 60.5 million shares in the four weeks ending Nov. 15, according to filings.
This is the second telecom company to attract attention this year because of its dividend. In May, BCE halved its dividend payout – which at the time had a yield of 13 per cent, widely seen as unsustainable – in order to allocate that cash elsewhere.
Telus’s dividend pause follows a previous dividend-growth reduction. In May, Telus reduced its dividend-growth target to between 3-per-cent and 8-per-cent growth annually from 2026 to 2028 to help it reach its leverage goals of three times net-debt-to-earnings before interest, taxes, depreciation and amortization by the end of 2027, the company said.
In addition to the dividend pause, on Wednesday Telus also provided forward guidance on its free cash flow, saying it expects to generate $2.15-billion in free cash flow in 2025, and a minimum compound annual growth rate of 10 per cent between 2026 and 2028. Telus had $25.7-billion in long-term debt as of Sept. 30.
It also shared a more detailed timeline on removing the discount from its dividend-reinvestment plan, which it plans to do entirely by the end of 2027, and reiterated that it is continuing other deleveraging initiatives.
These include selling real estate and copper assets, pursuing a strategic partner for Telus Health and potentially issuing more hybrid debt.
With reports from Andrew Willis