3 Reasons Telus Corporation (TSX:T) Might Be the Best Dividend Stock

Telus Corporation (TSX:T)(NYSE:TU) has a lot to offer investors that are looking for a great dividend stock to own for the long haul.

| More on:

There is no shortage of dividend stocks out there for investors to choose from. However, you have to be careful in picking one because you could be taking on some big risks with your returns if you focus solely on yield. One dividend stock that stands out from the rest is Telus (TSX:T)(NYSE:TU), and there are three reasons why I think it may be the best one on the TSX.

Stable, dominant force in its industry

Telus is among the leaders in its industry, and there’s no imminent danger in that changing any time soon.

Unless the CRTC were to open competition in the industry to U.S. companies, which is a long shot, then Telus is going to remain a dominant player in telecom that’s going to continue to grow. Revenues of $12 billion in 2014 have increased to over $14 billion this past year. With rising prices and new products, there are many ways that Telus and its competitors can increase sales without having to worry about finding new markets to expand into.

The business is sound and so is its future, and that’s something that investors may often take for granted when evaluating a dividend stock. After all, if the future is in doubt, then the dividend will be as well.

Good dividend-payout ratio

Another important factor for a dividend stock is its payout ratio. If a stock is paying a dividend ratio of over 90%, then that could be a cause for concern, because it means there’s not a big buffer if the company needs to free up cash, and it might make a dividend cut a necessary evil. Currently, quarterly payments of 54.5 cents mean that Telus is paying shareholders $2.18 per share every year. Over the past four quarters, the company’s earnings per share have totalled $2.68, meaning that Telus pays out about 81% of its earnings.

Although that may be a bit higher than investors would like to see, it’s still a manageable payout, especially given that the company is mature and doesn’t require a significant amount of capital expenditure.

Dividends are high and have risen over the years

Five years ago, Telus was paying its shareholders a dividend of 38 cents, which means quarterly payments have risen by more than 43% for a compounded annual growth rate of 7.5%. That’s a good, healthy rate, and it’s a realistic increase that investors could expect on an annual basis. While other stocks might certainly have higher rates of increase, they’re not always sustainable. And given that Telus currently pays a dividend of 4.3%, it’s a lot more challenging to raise those payouts than if the company were only paying a yield of 2%.

Bottom line

Telus is a very stable investment for investors and one that I would have no concerns about buying and forgetting. It’s very likely that investors will not only get a good dividend from owning the stock, but they’ll also benefit from a rising share price as well. It’s hard to find any negatives with owning one of the best blue-chip stocks on the TSX.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor David Jagielski has no position in any of the stocks mentioned.

More on Dividend Stocks

calculate and analyze stock
Dividend Stocks

This 5.5% Dividend Stock Pays Cash Every Single Month!

This REIT may offer monthly dividends, but don't forget about the potential returns in the growth industry its involved with.

Read more »

Silver coins fall into a piggy bank.
Dividend Stocks

How to Use Your TFSA to Earn up to $6,000 Per Year in Tax-Free Passive Income

A high return doesn't mean you have to make a high investment -- or a risky one -- especially with…

Read more »

path road success business
Dividend Stocks

2 High-Yield Dividend Stocks to Buy Hand Over Fist and 1 to Avoid

High yields are great and all, but only if returns come with them. And while two of these might, another…

Read more »

Man holds Canadian dollars in differing amounts
Dividend Stocks

This 7% Dividend Stock Pays Cash Every Month

A high dividend yield isn't everything. But when it pays out each month and offers this stability, it's worth considering!

Read more »

young people stare at smartphones
Dividend Stocks

GST/HST “Vacation”: Everything Canadians Need to Know

The GST/HST "vacation" is a little treat for the holidays, along with a $250 payment. What should you do with…

Read more »

Train cars pass over trestle bridge in the mountains
Dividend Stocks

Is CNR Stock a Buy, Sell, or Hold for 2025?

Can CNR stock continue its long-term outperformance into 2025 and beyond? Let's explore whether now is a good time to…

Read more »

coins jump into piggy bank
Dividend Stocks

The Smartest Dividend Stocks to Buy With $500 Right Now

These top dividend stocks both offer attractive yields and trade off their highs, making them two of the best to…

Read more »

Middle aged man drinks coffee
Dividend Stocks

Here’s the Average TFSA Balance at Age 35 in Canada

At age 35, it might not seem like you need to be thinking about your future cash flow. But ideally,…

Read more »