TELUS Q1 2025 Earnings: A Steady Hand Amid Transition, Fueling Dividend Growth

TELUS Corporation’s Q1 2025 earnings report underscores a company navigating sector-wide challenges while maintaining fiscal discipline and shareholder focus. Despite a modest dip in adjusted net income, the telecom giant’s resilience in core operations, strategic asset monetization, and an extended dividend growth program position it as a stable investment play in a volatile market.

Financial Resilience Amid Sector Headwinds
TELUS reported adjusted net income of $388 million for Q1 2025, a marginal 1% decline from the same period in 2024. While this may raise eyebrows, the figure aligns with non-GAAP metrics that exclude one-off costs, such as TELUS Digital’s strategic investments and lower net reversals of provisions. Adjusted basic EPS held steady at $0.26, in line with estimates, reflecting disciplined management of earnings volatility.

The slight decline in Adjusted EBITDA to over $1.8 billion (down 1%) masks deeper operational nuances. TELUS Digital’s Adjusted EBITDA dropped 38%, driven by upfront investments in corporate initiatives and lower revenue recognition. However, this was offset by gains in TTech’s Adjusted EBITDA (up 3%) and the newly segmented TELUS Health division, which delivered a 30% surge in Adjusted EBITDA on 12% revenue growth. This bifurcated performance highlights TELUS’s shift toward high-margin, growth-oriented segments even as legacy divisions face pressure.

Dividend Growth: A Pillar of Investor Confidence
TELUS’s decision to boost its quarterly dividend by 7% to $0.4163 per share—yielding ~8% at current prices—signals confidence in its cash flow trajectory. The dividend yield now outpaces the S&P/TSX Telecommunication Services Index average, making it an attractive option for income-focused investors.

The company also extended its dividend growth program through 2028, targeting 3-8% annual hikes. This is underpinned by three pillars:
1. Adjusted EBITDA growth in high-margin segments like TELUS Health and TTech.
2. Free cash flow expansion, which rose 22% year-over-year to $488 million due to lower CapEx and operational efficiencies.
3. Leverage reduction, with plans to cut the net debt-to-EBITDA ratio to 3.0x by 2027 via debt repayments and asset sales (e.g., real estate, copper, and potential tower divestitures).

Operational Momentum: Customer Growth and Strategic Acquisitions
TELUS added 218,000 total mobile and fixed customers in Q1, driven by bundled services and broadband adoption. The 168,000 mobile and connected device additions reflect strong demand for 5G and IoT solutions, while fixed services grew 50,000 customers, highlighting the stability of its wired network.

TELUS Health’s performance was a standout, with global healthcare lives rising to 76.5 million (up 7%) and synergies from acquisitions like Workplace Options (serving 88 million employees) boosting its scale. This segment’s 30% EBITDA growth underscores TELUS’s success in monetizing data-driven healthcare solutions—a trend likely to accelerate as aging populations and digital health adoption grow.

Challenges and Strategic Countermoves
TELUS faces headwinds in legacy segments, notably TELUS Digital’s short-term EBITDA contraction, but these are mitigated by long-term gains. The company’s $1.6 billion hybrid debt offering in April 2025 and plans to eliminate its dividend reinvestment plan discount by 2027 will reduce interest costs and improve capital allocation efficiency.

Conclusion: A Steady Earnings Ship Navigating Shifting Seas
TELUS’s Q1 results reveal a company balancing near-term sector pressures with strategic bets on high-margin growth areas. With free cash flow up 22% year-over-year, TELUS Health’s 30% EBITDA surge, and a dividend growth program anchored by $2.15 billion in 2025 free cash flow targets, the company is well-positioned to weather industry turbulence.

Investors should note that TELUS’s 7% dividend hike and extended growth program are not just shareholder-friendly gestures—they’re the result of disciplined financial stewardship. The reduction of leverage to 3.0x by 2027, paired with asset sales and operational efficiencies, suggests a path to sustained cash flow resilience.

For income investors, TELUS’s 8% dividend yield and visible growth levers in healthcare and enterprise tech make it a compelling option. However, the stock’s valuation—trading at ~8x 2025E EBITDA—must be weighed against its reliance on execution in high-investment areas like TELUS Digital.

In sum, TELUS’s Q1 report is a testament to its ability to prioritize stability while betting on tomorrow’s winners. With a disciplined balance sheet and strategic clarity, it’s a telecom stock that could outperform in a market hungry for steady dividends and tangible growth narratives.