Telecom shares are a gradual and dependable supply of dividend earnings for traders. Till one thing out of character occurs, like what occurred with BCE (TSX:BCE) inventory. An enormous dividend reduce and plenty of weak quarters later, many traders are understandably cautious of BCE inventory.
If that’s you, neglect about BCE and take into account Telus (TSX:T) as an alternative, a dividend inventory that’s yielding an unimaginable 7.58% and posting robust earnings and money flows.
Make no mistake, the telecom surroundings has been troublesome for all within the business, together with Telus. Within the final three years, BCE inventory has been halved.
In distinction, Telus inventory has declined 22% — it’s nonetheless lots, however clearly a significantly better efficiency. So, what made the distinction, you would possibly ask?
Nicely, in a nutshell, it boils right down to the quantity of leverage that BCE held. In 2024, all telecom suppliers had been mandated to present opponents entry to their essential fibre networks for a price. And this negatively affected all of them. In the present day, we’re seeing that this transfer has had the supposed impact — extra competitors, extra choices for shoppers, and decrease costs.
This despatched BCE to the breaking level, as the corporate was saddled with an excessive amount of debt and curiosity funds that it couldn’t afford. Telus, nevertheless, fared significantly better. Let’s take a better take a look at Telus.
Telus shines
Telus has finished a effective job on this difficult surroundings. In reality, Telus’s earnings per share (EPS) in 2024 really elevated 9.5% to $1.04, and within the first six months of 2025, EPS solely declined 6%. In Telus’s most up-to-date quarter, the proof of the corporate’s robust future was on full show as the corporate continued to give attention to diversifying its income base, cost-cutting, and progress areas.
For instance, Telus Well being noticed its income and earnings earlier than curiosity, taxes, depreciation, and amortization (EBITDA) develop very properly, up 16% and 29% respectively. Additionally, the corporate’s EBITDA margin elevated 180 foundation factors to 17.5%. Moreover, Telus’s free money circulation elevated 11% to $535 million. This was pushed by increased EBITDA and decrease capital expenditures and curiosity expense.
Importantly, Telus can be specializing in asset monetization because it heads into the long run. An instance of that is the corporate’s latest sale of a 49.9% curiosity in its wi-fi tower operator, Terrion. In response to Telus, the vast majority of the proceeds from the sale are for use to deleverage. In reality, the deal will scale back Telus’s internet debt by greater than $1.25 billion.
What’s forward for Telus inventory?
Within the subsequent years, Telus’s purpose is to create worth by specializing in its progress companies, similar to Telus Well being, and to ship on the asset monetization alternatives. Because of this, administration expects to ship EBITDA progress, steady capital expenditures and free money circulation enlargement.
Extra particularly, Telus expects income progress of 2-4% and EBITDA progress of 3-5%, with free money circulation of $2.15 billion. Additionally, Telus’s purpose is to have a internet debt-to-EBITDA ratio of 3 times by 2027. It’s at present at 3.7 instances.
The underside line
BCE inventory has been an actual nail-biter, with weak efficiency hitting traders arduous. For worth traders who’ve the urge for food, it would nonetheless be value contemplating. Nevertheless, for traders preferring much less stress and a clearer, much less dangerous path to progress, Telus inventory could also be a better option.
