TELUS Corporation (TSE:T) experienced its most significant single-day decline in recent memory on Thursday, with shares dropping 12.3% to C$13.22 following the announcement of a 55% reduction in its quarterly dividend. The drastic measure, aimed at bolstering the company's balance sheet, effectively eliminated its yield advantage over key competitor BCE Inc. (TSE:BCE).
The telecom giant's stock touched a new 52-week low of C$12.93 during the session, with trading volume surging to 22.4 million shares—nearly triple the average daily volume. The broader S&P/TSX Composite index slipped just 0.13%, underscoring that the selloff was company-specific rather than market-driven.
Dividend Reset and Yield Dynamics
TELUS's board reduced the quarterly dividend to C$0.1875 per share, down from C$0.4184. This adjustment brings the indicated annual yield to approximately 5.7%, closely mirroring BCE's 5.8% yield. Prior to the reset, TELUS offered a yield of 11.1% based on Thursday's closing price, representing a 5.3 percentage point premium over BCE. That premium has now flipped to a slight deficit of 0.1 percentage points.
The revised dividend structure, based on 1.57 billion shares outstanding, implies an annual cash outlay of approximately C$1.18 billion—a reduction of C$1.45 billion from the previous framework. This represents 65% of the company's updated 2026 free cash flow forecast of C$1.8 billion, though the company's stated payout policy now targets 45%-60% of trailing free cash flow, a narrowing from the previous 60%-75% of prospective free cash flow.
Financial Performance and Guidance
The dividend reset accompanies a broader revision of financial targets. Management slashed its 2026 free cash flow projection by 27% to C$1.8 billion, while capital expenditure guidance increased 13% to approximately C$2.6 billion. Service revenue growth is now expected to be flat to down 2%, a significant downgrade from the prior 2%-4% growth forecast. Adjusted EBITDA growth guidance was also cut to a decline of 2%-4%, down from growth of 2%-4%.
In the second quarter, operating revenues fell 3% year-over-year to C$4.929 billion, while adjusted EBITDA declined 2% to C$1.777 billion. Adjusted net income dropped 26% to C$254 million, and adjusted earnings per share slid 27% to C$0.16. The company reported a net loss of C$1.83 billion, driven largely by a non-cash impairment of C$2.1 billion related to TELUS Digital. Operating cash flow did improve, rising 15% to C$1.342 billion, and free cash flow edged up 2% to C$545 million.
Strategic Initiatives and Deleveraging
CEO Victor Dodig stated, "The macro environment has shifted and we are responding with clarity and discipline." The company is actively seeking buyers for non-core Health businesses and real estate holdings, with proceeds earmarked for debt reduction. Net debt currently stands at 3.5 times adjusted EBITDA, and management aims to reduce this to 3.0 times or below by the end of 2028.
TELUS also announced it will discontinue its dividend reinvestment plan discount effective October 1. Restructuring charges are expected to reach C$900 million, up from C$500 million previously, with cash restructuring payments rising to C$650 million from C$450 million.
Segment Performance
Wireless operations remained relatively stable, with mobile network revenue increasing 1% and average revenue per user (ARPU) dipping just 0.4% to C$56.36. Churn rose slightly to 1.08%. TELUS Health posted a 1% increase in adjusted EBITDA, while TELUS Digital saw revenue decline by C$75 million and adjusted EBITDA fall 20%.
Investors will be closely watching the analyst call scheduled for 12:30 p.m. EDT, where management is expected to provide more details on the asset sale timeline and cash recovery trajectory. The company plans to unveil a comprehensive capital plan alongside third-quarter results in November.
Risks remain elevated, including greater price competition, regulatory pressures, and potential restructuring setbacks that could hinder deleveraging efforts. The success of this strategy hinges on the company's ability to execute asset disposals and achieve sustainable cash flow improvements.
