1) TELUS’ “frozen dividend” and the pertinent question: cut risk vs. patience
Attention is on TELUS’ earnings, its “frozen” dividend, and the possibility of a cut. The halt in dividend growth is perceived as less damaging than a cut but raises doubts about the strategy’s dependability.
– The pause in dividend growth suggests strain, not a cut
– Can TELUS accelerate free cash flow sufficiently to support the dividend in the long run?
– The years 2026–2027 are pivotal
2) Business model: the primary cash generator vs. “nice but small” growth areas
TELUS is segmented for better understanding. The problem isn’t with the growth initiatives but their marginal impact.
– T-Tech (wireless + wireline): experiencing revenue pressure
– TELUS Health: the most promising growth area, supported by acquisitions yet still minor
– TELUS Digital: more potential compared to actual growth
– TELUS Agriculture: finding it hard to make headway with lackluster revenue
3) The “Enbridge scenario”: sentiment can be bleak… and still rebound
A comparison is drawn to demonstrate market sentiment. A stock can bounce back if management performs well, even with negative sentiment.
– Negative sentiment does not signify “perpetual loss”
– Recovery hinges on execution, not just hope
– Investors require guidelines, not mere expectation
4) What’s constraining TELUS: debt + sluggish growth in a more competitive climate
TELUS encounters difficulties: substantial debt, increasing interest expenses, sluggish growth, and heightened competition prompted by government policy.
– Pressure on the balance sheet (debt + rising interest costs)
– Revenue growth is challenging for Canadian telecom companies
– Government policy fosters increased wireless competition
– Elevated CapEx requirements render telcos “utility-like” (rate-sensitive, slower growth)
5) The December 30, 2025, dividend growth pause depicted through “Joe”
TELUS is compared to an individual on a constrained budget, striving to lessen outlays and increase income while still facing threats if strategies fail.
– Enhance free cash flow (growth + reduced CapEx over time)
– Asset monetization (e.g., selling parts of tower stake) to mitigate debt
– Limit dilution by discontinuing the DRIP discount by 2027
– The uncertainty: what if growth doesn’t pan out?
6) Q4 2025 results: weak revenue/earnings, but cash flow is improving
The quarter isn’t catastrophic but lacks excitement. Revenue and EPS decreased, but operating and free cash flow increased, critical for capital-heavy companies.
– Revenue down ~2% YoY; T-Tech down ~4–5%
– TELUS Health rose ~13% (positive, yet a smaller segment)
– TELUS Digital increased ~3% (boosted by FX, not solely organic growth)
– EPS down ~20%
– Operating cash flow up ~5%; free cash flow up ~7%
– CapEx increased ~18% (a downside here, despite acquisition connections)
7) Mike’s framework: thesis ? rules ? measurable benchmarks
“Wait and see” does not constitute a strategy. Whether to maintain or purchase depends on your approach (dividend growth, income, or turnaround) and if TELUS meets quantifiable targets.
– If you’re a dividend growth investor, a freeze could be a dealbreaker
– If you’re focused on income/turnarounds, confidence in the strategy and numbers is essential
– Establish a timeline and metrics (cash flow, CapEx, guidance execution) and assess quarterly
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