Q: The current dividend yield on Telus is close to 7.75% at the market close Aug 1. High dividend yield is a red flag. Is this dividend sustainable? Is it a red flag and if so why?
Is it following a similar path as BCE?
Is it following a similar path as BCE?
5i Research Answer:
The sector has been weak, and this has brought down prices (and raised yields). But Telus has also increased its dividend, unlike BCE which cut theirs by 50%. Telus stock is now up 10% YTD as sentiment shifts and interest rate declines are expected. We would consider its fundamentals as better positioned than BCE. Any stock incurs some risks, but T's 12-month payout ratio is less than 50% (based on operating cash flow) and we would be comfortable owning it for income.