Income investors often flock to Telus (TSX:T)(NYSE:TU) for its reliable history, but recent developments suggest the telecom giant is at a critical juncture. With a dividend yield now swelling to 9.2% following a steep 28% stock decline over the past five years, the company has officially hit the pause button on its long-running dividend growth program as of December 2025. While the quarterly payout remains high at $0.4184 per share, the halt signals a strategic pivot toward balance sheet repair rather than immediate income growth.
The core issue weighing on the stock is a heavy debt load combined with intense competition in the Canadian telecom sector. Aggressive pricing wars and weaker equipment sales have squeezed margins, pushing the payout ratio to uncomfortable levels that are well above 100% of earnings in 2025.
Despite the headwinds, the outlook isn't entirely bleak. Telus projects free cash flow will grow at a compounded annual growth rate of at least 10% through 2028. If successful, this would cover the dividend more sustainably and put many investors' concerns at ease. And that, in turn, could help improve its valuation and lead to a much-needed rally for the stock.
If you're willing to be patient with the stock, Telus can still make for a good income investment to hang on to. It remains a top telecom company in Canada. And even if dividend increases may not be coming anytime soon, it still offers an incredibly high yield that can generate a ton of income for your portfolio.
