TELUS (TSX:T) Delivers Resilient Q1 Earnings, Reinforces Dividend Growth Strategy

TELUS Corporation (TSX:T) has announced its first-quarter 2025 results, showcasing robust financial performance and a significant dividend increase that underscores its commitment to shareholder returns. The telecom giant reported a 7% hike in its quarterly dividend to $0.4163 per share, marking the latest step in its extended dividend growth program targeting 3–8% annual increases through 2028. This move is backed by strong free cash flow growth, strategic deleveraging, and record customer additions.

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Key Financial Highlights

TELUS’s Q1 2025 performance was driven by:
- 22% year-over-year growth in consolidated free cash flow to $488 million, fueled by lower capital expenditures (CapEx) and higher EBITDA.
- Adjusted EBITDA growth of 4% in its TTech segment, with TELUS Health contributing a 30% surge in EBITDA due to expanded healthcare coverage (now serving 76.5 million lives globally).
- Record customer growth, adding 218,000 total mobile and fixed customers, including 168,000 mobile/connected devices and 50,000 fixed broadband customers, while maintaining low postpaid mobile churn of 0.84%.

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The company also reported a 115% jump in net income to $301 million, driven by reduced financing costs and operational efficiency.

This chart illustrates the company’s consistent dividend growth trajectory, with the Q1 2025 increase marking the latest in a series of hikes that have lifted the quarterly payout from $0.3112 in early 2021 to $0.4163 today—a 33% increase over four years.

Dividend Growth Program: Sustainable or Risky?

TELUS’s dividend increase is supported by strong free cash flow generation and a disciplined capital allocation strategy. Key pillars include:
1. Deleveraging: The company aims to reduce its net debt-to-EBITDA ratio from a pro-forma 3.8x as of Q1 2025 to 3.0x by 2027, leveraging asset sales (e.g., real estate, copper networks) and lower CapEx.
2. Cost Discipline: CapEx fell 19% YoY to $587 million, with a shift toward maintenance spending and partner-led fiber deployment.
3. Strategic Acquisitions: The $1.1 billion acquisition of Workplace Options in May 2025 strengthens its TELUS Health segment, aligning with its 12% revenue growth and 30% EBITDA expansion in Q1.

However, risks remain. TELUS faces moderating mobile ARPU (down 3.7% YoY to $57.13) due to competitive pricing pressures, and rising costs in areas like cloud licensing and network operations. Analysts like RBC Capital Markets have noted that while the dividend growth program is achievable, it hinges on sustained cost control and deleveraging progress.

Investment Considerations

• Dividend Yield: The 8% dividend yield (based on TELUS’s recent stock price of ~$52) makes it an attractive income play, though investors should note that yields are calculated using share price, which can fluctuate.
• Valuation: TELUS trades at a P/E ratio of 18.4x, slightly above its 5-year average of 16.8x, reflecting optimism around its growth initiatives.
• Competitive Position: The company’s 87% 5G coverage in Canada and focus on bundled services (e.g., internet + TV + mobile) provide a defensive moat in a saturated market.

This comparison shows TELUS outperforming the broader market, rising ~15% year-to-date as of May 2025, driven by dividend optimism and sector-specific tailwinds in healthcare and broadband.

Conclusion: A Dividend Champion with Room to Grow

TELUS’s Q1 results and dividend hike reaffirm its position as a high-quality telecom stock with a disciplined approach to capital allocation. The company’s focus on deleveraging, asset monetization, and high-margin segments like TELUS Health provides a solid foundation for sustaining its 3–8% dividend growth target through 2028.

Crucial metrics to monitor include:
- Free cash flow stability: TELUS aims for $2.15 billion in 2025, which will be critical to funding dividends while reducing leverage.
- Debt reduction progress: Achieving a 3.0x net debt/EBITDA ratio by 2027 would significantly de-risk the dividend program.
- Customer retention and ARPU trends: Sustaining low churn and mitigating mobile pricing pressures will be key to maintaining top-line growth.

For income investors, TELUS’s 8% yield and 20-year dividend growth streak make it a compelling choice, especially given its defensive sector exposure and Canadian dominance. While valuation risks exist, the company’s execution on deleveraging and growth initiatives positions it well to deliver on its shareholder commitments.

In a market increasingly focused on dividends and stability, TELUS continues to set the bar for telecom resilience.