As one of Canada’s leading telecommunications companies, Telus Inc. (TSX:T) has been providing significant value for its shareholders. At this time, Telus remains a top stock for dividend investors as its continued growth carries into the years ahead.
Without further ado, here are the reasons why Telus stock is worth considering.
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A dividend yield of 5%
One of the most striking aspects of the buy case for Telus stock is its dividend yield. At 5.17%, this is not only a very robust dividend, but it’s also one that comes with little risk. This is illustrated by the company’s strong liquidity and free cash flow profile. Last quarter, free cash flow increased 64% to $2 billion. The higher cash stream is a function of higher EBITDA and lower capital expenditure requirements for the business.
Also, Telus’ business is a relatively defensive one. In fact, the telecommunications industry is well-known for its stability and predictability. Furthermore, TELUS and its main competitors in this industry are surrounded by high barriers to entry building a strong moat around them.
For Telus, this stability and predictability have been accompanied by strong growth. In fact, in its latest quarter, Telus posted a revenue growth rate of 12.6% and an adjusted EBITDA growth rate of 11.3%. These kinds of growth rates for a company that generates roughly $20 billion in annual revenue is quite significant.
So, not surprisingly, along with Telus’ strong dividend yield, we have seen strong capital gains – Telus’ stock price has returned 17% over the last five years.
Invest $10,000 Today for $517 in Annual Income
Telus has all the qualities that we should look for in a dividend stock. As I’ve previously mentioned, the company is financially strong, stable, and predictable. This inspires confidence in the integrity of the dividend as well as its future growth rate.
In fact, this is the thirteenth year of Telus’ leading dividend program. It has brought shareholders an 8.2% compound annual dividend growth rate over this time period. Looking ahead, Telus expects continued growth in 2023 and beyond for the business as well as the dividend.
For example, 2023 revenue and EBITDA are expected to show double-digit growth in 2023. This will be accompanied by strong margins and dividend growth – 7% to 10% dividend growth through to the end of 2025.
At Telus’ current dividend yield, if you invest $10,000 today, you will receive $517 in annual income. If you invest $20,000, you will receive double that, $1,034 in annual income. This return is very attractive, especially considering that the risk profile of Telus is so low.
Expect continued growth for Telus
Beyond the next couple of years, Telus is also building strong long-term growth into its business. Telus Health and Telus International are two areas of growth that are charting new territory.
Telus Health is a leader in digital health technology solutions. It’s “leveraging the power of technology to improve access to care and revolutionize the flow of health information.” Telus International provides multilingual customer service outsourcing and digital IT services to global clients. Services include technical support, AI solutions, and infrastructure management.
Both of these new and related businesses are seeing strong demand and growth. They will help shape Telus’ growth profile going forward. They’ll also drive revenue, earnings growth, and ultimately, Telus’ stock price.
