TELUS Stock at C$13.25: The New 5.7% Yield Still Faces a 3.5× Debt Test

TELUS shares are offering a much more believable dividend yield after the payout reset, but the stock is still a debt-reduction trade rather than a simple income bargain. Delayed intraday data showed TELUS Corporation (TSX:T; NYSE:TU) at C$13.25 at 12:27 p.m. ET on Tuesday, down 1.0% from Friday's C$13.39 close and only about 2.3% above its 52-week low. At that price, the new C$0.75 annual dividend yields approximately 5.7%. The former C$1.6736 annualized payout would have yielded 12.6% at the same share price—a warning embedded in the valuation, not a realistic target for what shareholders should expect to get back. The dividend cut bought time, not growth TELUS declared a C$0.1875 quarterly dividend, down 55%, payable October 1 to shareholders of record at the close on September 10. The company's dividend information page also confirms that it withdrew the growth model that had already been paused and replaced its payout target with 45% to 60% of trailing 12-month free cash flow. Advertisements The cut removes C$0.9236 a share of annual income versus the old rate. In return, TELUS expects to retain about C$2.7 billion through 2028 for debt reduction. That is meaningful: the savings equal 1.5 times the company's entire C$1.8 billion 2026 free-cash-flow forecast. They also arrive over several years, however, while the operating pressure is immediate. The company ended June at 3.5 times net debt to adjusted EBITDA and now aims for approximately 3.0 times or less by the end of 2028. The deadline used to be 2027. TELUS said the extra year reflects competitive pricing and softer subscriber demand as population growth slows, according to its second-quarter filing. Advertisements That delay matters more than the headline yield. TELUS's July 31 results showed second-quarter service revenue down 1%, adjusted EBITDA down 2% and adjusted net income down 26%. Free cash flow edged 2% higher to C$545 million, but interest paid rose to C$450 million from C$308 million. A C$2.1 billion non-cash impairment at TELUS Digital drove a reported net loss of C$1.8 billion. Three numbers now decide the TELUS thesis 3.5 times: leverage needs to begin falling, not merely remain within a distant 2028 promise. TELUS says dividend savings, lower capital intensity and asset-sale proceeds will do the work. leverage needs to begin falling, not merely remain within a distant 2028 promise. TELUS says dividend savings, lower capital intensity and asset-sale proceeds will do the work. C$1.8 billion: the revised 2026 free-cash-flow forecast is down from C$2.45 billion at the start of the year. A further cut would weaken both the deleveraging path and confidence in the new payout framework. the revised 2026 free-cash-flow forecast is down from C$2.45 billion at the start of the year. A further cut would weaken both the deleveraging path and confidence in the new payout framework. 1.08%: second-quarter mobile-phone churn increased from 1.06%, while mobile ARPU slipped 0.4%. Those small movements show how intense Canadian telecom competition can erode the cash recovery. There is a credible upside path. PureFibre construction is approaching completion, TELUS continues to target 10% capital intensity, and management is reviewing non-core TELUS Health and real-estate assets for monetization. Ending the dividend-reinvestment discount on October 1 should also reduce the issuance of discounted shares. But none of those levers is automatic. Full-year capital spending was raised to about C$2.6 billion, and proceeds from asset sales have not yet been quantified. The company itself now guides to service revenue between flat and down 2% and adjusted EBITDA down 2% to 4% for 2026. What would change the stock's direction? The next re-rating does not require a return to the old dividend. It requires proof that retained cash is reaching the balance sheet without another reduction in operating guidance. Sequentially lower leverage, stable mobile economics and a defensible free-cash-flow recovery would make a 5.7% yield more attractive. Continued EBITDA contraction or disappointing asset-sale proceeds would leave the shares looking cheap for good reason. Advertisements Investors get two near-term checkpoints. Chief executive Victor Dodig is scheduled to appear at the BMO TMT Conference on September 15, and TELUS has promised a fuller capital-returns framework with third-quarter results in November. Until then, C$13.25 prices in a sizable income repair. It does not yet price in a completed balance-sheet repair.