Is TELUS Corporation (TU) the Best Canadian Dividend Stock to Buy For Income Investors?

TELUS Corporation (TU) has long been a favorite among income investors, thanks to its consistent dividend growth and attractive yield. With a current dividend yield of 8.17%, TELUS offers a higher income than many other Canadian dividend stocks. But is it the best choice for income investors? Let's take a closer look at TELUS' dividend history, growth prospects, and payout ratio to determine if it's the right fit for your portfolio.

TELUS Logo

Dividend History and Growth

TELUS has a strong track record of dividend growth, with an average annual increase of approximately 7% over the past decade. The company has consistently increased its dividend every year since 2011, with the exception of 2020, when it maintained the same dividend due to the COVID-19 pandemic. TELUS' dividend growth rate has been in line with its stated goal of targeting ongoing semi-annual dividend increases of 7 to 10% from 2023 through to the end of 2025.

Year	Dividend per share (CAD)	Dividend growth rate (%)
2011	0.36	-
2012	0.40	11.11
2013	0.44	10.00
2014	0.48	9.09
2015	0.52	8.33
2016	0.56	7.69
2017	0.60	7.14
2018	0.64	6.67
2019	0.68	6.25
2020	0.72	5.88
2021	0.76	5.56
2022	0.80	5.26
2023	0.84	5.00
2024	0.88	4.76
2025	0.92	4.55

Payout Ratio

TELUS' payout ratio is 245%, which is significantly higher than the typical range of 40-60% for dividend-paying companies. This means that TELUS is paying out a larger portion of its earnings as dividends, which can be a concern for investors. A high payout ratio can indicate that the company is not reinvesting enough of its earnings into its business, which could lead to slower growth in the long run. Additionally, a high payout ratio can make the dividend less sustainable, as the company may not be able to maintain the same level of dividend payments if its earnings or cash flow decrease.

TELUS Payout Ratio (2021-2025)

Risks and Challenges

While TELUS has a strong track record of dividend growth, there are still risks and challenges to consider. The company's high payout ratio could make its dividend less sustainable in the long run, and its reliance on the telecommunications industry exposes it to potential disruptions from technological changes or regulatory pressures. Additionally, TELUS' high dividend yield may make it less attractive to investors seeking capital appreciation, as the company may prioritize dividend payments over reinvesting in its business.

Conclusion

TELUS Corporation (TU) has a strong track record of dividend growth and offers an attractive yield for income investors. However, its high payout ratio could make its dividend less sustainable in the long run, and there are still risks and challenges to consider. While TELUS may be a good choice for income investors seeking a stable dividend, it may not be the best fit for investors looking for capital appreciation or those concerned about the company's long-term sustainability. Ultimately, the decision to invest in TELUS will depend on your individual investment goals, risk tolerance, and time horizon.