An 8.6% yield can appear like a free lunch in February. It will also be a warning label. Once you choose a dividend inventory, ignore the hype and observe the money. Ask three issues: can it fund the payout after essential spending, can it refinance debt with out ache, and may it defend its pricing energy? A dividend that is determined by borrowing or fixed share issuance turns “earnings” right into a gradual leak. The objective is just not the most important yield. The objective is probably the most sturdy yield. So, is that this dividend inventory value it?
T
TELUS (Tsx:t) sits within the highlight as a result of its yield rose as its share worth sagged. It operates wi-fi and web networks throughout Canada and sells TV and enterprise connectivity. It additionally owns TELUS Well being and a digital providers arm that helps buyer expertise and IT work. That blend sounds defensive, however traders have handled it like a careworn earnings identify recently, which is why the yield now screens close to 8.6%.
The previous 12 months introduced a tone change from administration. In December 2025, TELUS mentioned it intends to maintain paying the dividend at its present nominal degree. Nevertheless, it could pause dividend development till the share worth and yield higher replicate the corporate’s prospects. Many telecom patrons depend on a gradual sample of will increase. A pause doesn’t equal a lower, but it indicators the board needs respiratory room whereas it rebuilds money flexibility.
TELUS additionally pushed a giant long-term funding message. In Might 2025, it deliberate to take a position greater than $70 billion in Canada over the following 5 years, together with two synthetic intelligence (AI) information centres and continued community growth, with emphasis on rural protection. That may help long-run competitiveness and buyer development. It additionally retains capital spending entrance and centre, which issues as a result of telecom dividends compete with towers, fibre, and spectrum for each greenback.
Into earnings
Current earnings present why the dividend debate feels so intense. Within the third quarter of 2025, TELUS reported consolidated working revenues and different earnings of about $5.1 billion, flat 12 months over 12 months. Adjusted earnings earlier than curiosity, taxes, depreciation, and amortization (EBITDA) rose about 1% to roughly $1.9 billion. Free money stream elevated about 8% to round $611 million, helped by decrease capital expenditures within the quarter. Adjusted earnings per share (EPS) got here in at $0.24, down from $0.28 a 12 months earlier.
The dividend stayed intact, however protection seems to be tight. TELUS declared a quarterly dividend of $0.4184 per share payable Jan. 2, 2026, up 4% from a 12 months earlier. But that larger dividend comes with a payout ratio of about 210%, which indicators weak earnings protection proper now. TELUS can argue that money stream tells the true story, and money stream did enhance within the third quarter. Nonetheless, a excessive yield paired with skinny protection forces traders to look at leverage and refinancing threat carefully.
Administration’s plan goals straight at that strain. TELUS set expectations of about $2.15 billion of free money stream in 2025 and a preliminary goal of about $2.4 billion in 2026, alongside a 2026 capital expenditure goal of round $2.3 billion. If it hits these numbers and retains capital depth trending down, the dividend turns into simpler to defend. If it misses, the market will hold demanding trade-offs as a result of it can not get each heavy funding and excessive payouts eternally.
Backside line
So, is it a purchase, or is it the dividend entice to keep away from this February? It might be a purchase for a affected person investor who needs a excessive beginning yield and believes free money stream improves sufficient to help the payout with out monetary gymnastics. And I imply, right here’s what that dividend inventory may herald from $7,000 alone.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | ANNUAL DIVIDEND | ANNUAL TOTAL PAYOUT | FREQUENCY | TOTAL INVESTMENT |
|---|---|---|---|---|---|---|
| T | $19.34 | 362 | $1.67 | $604.54 | Quarterly | $6,998. 08 |
Nevertheless, it might be a cross for anybody who wants certainty, as a result of telecom competitors and huge capital budgets can flip “secure” into “stretched” rapidly. The entice is just not proudly owning TELUS. The entice is shopping for the yield and ignoring what it should show subsequent this 12 months. Subsequent earnings land on Feb. 12, 2026, and the market will pay attention free of charge money stream, leverage, and any trace of a dividend-growth restart.