Are you a dividend seeker? Within the final 18 months, the dividend setting has been risky as Canada faces the best rates of interest in over a decade. Many small and mid-sized corporations slashed their dividends to maintain up with the rising curiosity expense. A number of dividend aristocrats additionally slowed their dividend progress: BCE slowed its progress charge in 2024, whereas Enbridge and Canadian Utilities slowed it in 2020. Amid this uncertainty, one dividend inventory introduced a monster dividend increase of seven.1%. 

A TSX inventory proclaims monster dividend increase in 2024

Telecom big Telus Company (TSX:T) elevated its quarterly dividend per share to $0.3761 and paid it on January 2. The following dividend is payable on April 1. It’s 7.1% larger than the $0.3511 quarterly dividend per share paid a yr in the past. And the perfect half is the corporate raises its dividend twice a yr. If it does improve its quarterly dividend in June, it may very well be $0.3890, representing a 7% improve from the yr in the past quarter. 

Earlier than we transfer additional, be aware that Telus has two shares buying and selling on the TSX. The one which pays dividends is Telus Company, which was buying and selling above $23 on the time of the writing of this text. The opposite one is Telus Worldwide, a progress inventory that doesn’t pay dividends. 

Coming again to Telus Company’s dividend increase. The administration has dedicated to lift its dividend by 7 to 10% between 2023 and 2025. Though the administration can change this choice relying on the enterprise circumstances, it has maintained its progress to date. Additionally, be aware that 7% progress is within the decrease vary. If the rate of interest setting have been conducive, it may have even elevated the dividend by 10%. 

Can this inventory maintain its dividend increase all through 2024? 

Whereas the dividend increase seems to be engaging, it additionally raises considerations about whether or not this beneficiant dividend will harm the corporate’s capacity to maintain the dividend payouts. You’ll be able to measure this with the corporate’s dividend payout ratio, the proportion of free money circulation (FCF) left after debt installments and capital spending to pay dividends. 

Telus administration has set a goal payout ratio of 60 to 75% of FCF. Nevertheless, high-interest bills and capital spending decreased the corporate’s FCF and elevated the payout ratio to 77% in 2023. The ratio is barely above its goal, and it’s assured it’s going to cut back this ratio as capital spending falls. 

Whereas administration has not given any trace of decreasing dividend progress, allow us to not rule out the likelihood. If the administration pauses additional dividend progress, its 2024 dividend per share would develop by 5.2% to $1.50 from $1.429 in 2023. And if it continues with its mid-year dividend progress, the 2024 dividend progress can be 7%. 

Telus has maintained liquidity of $3.1 billion, above its minimal liquidity requirement of $1 billion, hinting that it has adequate funds to resist high-interest charges. T inventory can proceed to pay its dividends, because it has adequate money circulation and income progress. The corporate will hold extending its debt by issuing new debentures and utilizing the proceeds to repay the maturing debentures.

Investing on this inventory

Now could be a ripe time to speculate on this telco because the inventory is buying and selling nearer to its 52-week low, and the dividend progress has inflated its yield to six.49%. Telus has been rising dividends since 2011. Like all different dividend aristocrats, Telus may even sluggish its progress charge sooner or later. By investing early in its progress, you may benefit from the excessive progress and compound your returns with a dividend reinvestment plan (DRIP).

Take into account investing small quantities at common intervals in Telus to construct a sizeable passive earnings to your retirement.