Telus (TSX:T) sat out a lot of the TSX rally that occurred over the previous two years. Contrarian traders are questioning if Telus inventory is now undervalued and good to purchase for a self-directed Tax-Free Financial savings Account (TFSA) or Registered Retirement Financial savings Plan (RRSP) portfolio targeted on dividend revenue.
Telus share worth
Telus trades close to $22 per share on the time of writing. The inventory is up about 12% in 2025, however is approach off the $34 it fetched again within the spring of 2022.
Rising rates of interest precipitated a lot of the grief within the second half of 2022 and thru 2023. Telus carries quite a lot of debt on its steadiness sheet. The sharp rise in borrowing prices over such a brief time period drove up curiosity bills on variable-rate loans and made it dearer to borrow extra funds.
In late 2023, the Financial institution of Canada signalled it was performed elevating rates of interest to combat inflation. The central financial institution then began to scale back charges within the second half of final yr. This led to a rebound in rate-sensitive shares, however Telus missed the celebration. Value wars among the many Canadian cellular and web suppliers, mixed with income declines at Telus Digital (Telus Worldwide), offset the good thing about decrease curiosity prices. This is the reason Telus noticed its share worth decline to beneath $20 by the top of final yr.
Discount hunters began kicking the tires in January on the hopes that higher days are on the best way. That might nicely be the case now that costs for cellular plans have elevated significantly this yr. As well as, the Telus Well being subsidiary is performing nicely, delivering a 29% enhance in adjusted earnings earlier than curiosity, taxes, depreciation, and amortization (EBITDA) within the second quarter (Q2) of 2025 in comparison with Q2 2024.
Dangers
Web buyer additions in Q2 fell in comparison with Q2 final yr due partly to the drop in immigration. The decline in worldwide college students takes away an necessary development section for Canadian cellular and web service suppliers.
Telus Digital’s adjusted EBITDA fell 26% in Q2 2025. Telus is planning to take Telus Digital non-public as it really works to show the division round.
Tariffs are beginning to put strain on the Canadian economic system, and unemployment is transferring increased. A recession can be a headwind for gross sales of latest cellular gadgets.
Upside
Telus is targeted on decreasing debt. The corporate not too long ago introduced a deal to promote a 49.9% stake in its cell tower property for $1.26 billion. Telus can be monetizing actual property and different property with a aim of getting the net-debt to EBITDA leverage ratio down to a few occasions by 2027 from an anticipated 3.55 occasions by the top of this yr and three.7 occasions on the finish of Q2 2025. Complete debt was roughly $33 billion on the finish of June.
Working income rose 3% in Q2 and adjusted EBITDA rose 1% in comparison with the identical interval final yr, so the general enterprise seems to be stabilizing. Free money circulate elevated 11% in Q2 2025.
Publish-paid cellular churn stays beneath 1%, so Telus is doing a very good job of preserving cellular clients from leaving.
Rates of interest might proceed to say no into 2026 because the Financial institution of Canada switches its focus to offering help for a weakening economic system. Decrease charges will additional cut back curiosity bills.
The underside line
Headwinds persist, however a lot of the unhealthy information may already be mirrored within the share worth. Enhancements in free money circulate ought to help the dividend. Traders who purchase Telus on the present stage can get a yield of seven.6%, so that you receives a commission nicely to journey out the turbulence.
When you’ve got some money to place to work in a portfolio targeted on dividend revenue, this inventory deserves to be in your radar.
