Canadians looking to balance the appeal of high dividends with the potential for future returns can take a smart, diversified approach to their investments. While it is tempting to chase the highest yields, it is critical to ensure that these dividends are sustainable and not at the expense of long-term growth.
By combining high-dividend stocks with some growth-oriented investments, Canadians can enjoy stable income now while also positioning themselves for capital appreciation in the future. This way, they get the best of both worlds: a regular cash flow to enjoy today and the potential to build wealth tomorrow, all without putting all their eggs in one basket.
TELUS
TELUS (TSX:T), one of Canada’s leading telecommunications giants, is a staple of the TSX and has long been a favorite among income-focused investors. Known for its reliable wireless, internet, and television services, TELUS has earned a reputation for stability and consistent growth. What makes TELUS particularly attractive is its strong dividend, which it has not only maintained but regularly increased over the years. This makes it an attractive option for those who appreciate a stable income. With a strong market presence and a growing customer base, TELUS continues to demonstrate its ability to generate solid cash flow, supporting both its dividend payments and future investments.
But TELUS doesn’t stop at just paying out dividends. The company is also forward-thinking, investing heavily in technology and innovation. From expanding its 5G network to foraying into healthcare technology through TELUS Health, the company is positioning itself for future growth in areas beyond traditional telecommunications services. This dual focus on current revenue and future growth opportunities makes TELUS an attractive option, especially for investors who want a combination of stability and the potential for long-term capital appreciation. Plus, being a well-established player in a critical industry adds a layer of security, making TELUS a reliable stock to own in a Canadian portfolio.
In profits
TELUS’ recent earnings report paints a mixed picture, combining strong operational achievements with some caveats. The company reported solid growth with 332,000 new net customer additions in the second quarter, up 13% year-over-year. In addition, adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) grew 5.6% to approximately $1.8 billion. In addition, TELUS recorded a significant 71% increase in free cash flow to $478 million, reflecting higher EBITDA and lower capital expenditures. These figures underscore TELUS’ ability to drive profitability and efficiency even in a competitive environment.
However, investors should note that TELUS has adjusted its full-year outlook, trending toward the lower end of its original growth targets for technology operating revenue and adjusted EBITDA. The company cited ongoing competitive pressures in the mobility and fixed services markets as factors that could moderate revenue growth. Despite these challenges, TELUS remains focused on cost efficiency and maintaining its strong dividend program. This indicates confidence in its long-term strategy and commitment to shareholder returns.
It is still valuable
TELUS presents an attractive option for investors, especially those seeking consistent dividend income. With a forward annual dividend yield of 7%, TELUS offers an attractive return in a low interest rate environment. The company’s long-standing commitment to returning value to shareholders through dividends, despite challenges in the competitive telecommunications sector, reinforces its reliability as a dividend payer. In addition, TELUS has a track record of incremental dividend increases, indicating confidence in its ability to generate sustainable cash flow.
However, it is important to note TELUS’ current valuation and its financial metrics. The stock is trading at a forward price-to-earnings ratio of 22.42. This suggests that while the stock is not overly expensive, it is priced for moderate growth. The company’s significant debt load, with a total debt-to-equity ratio of 171.58%, also deserves attention as it could impact future profitability and flexibility. So how much would investors get for waiting for a rebound? Let’s look at the dividend on a $15,000 investment.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYMENT | FREQUENCY | TOTAL PORTFOLIO |
| I | $22.51 | 666 | $1.56 | $1,038.96 | quarterly | $15,000 |
That's right, you'll be adding $1,038.96 more just for investing today! When you add in the returns, this investment still looks pretty good.