TELUS (TSE:T) Has Announced That It Will Be Increasing Its Dividend To CA$0.33

TELUS Corporation (TSE:T) will increase its dividend on the 4th of January to CA$0.33. The announced payment will take the dividend yield to 4.3%, which is in line with the average for the industry.

Check out our latest analysis for TELUS

TELUS Doesn't Earn Enough To Cover Its Payments

We aren't too impressed by dividend yields unless they can be sustained over time. Before making this announcement, the company's dividend was much higher than its earnings. Without profits and cash flows increasing, it would be difficult for the company to continue paying the dividend at this level.

Over the next year, EPS is forecast to expand by 18.0%. If the dividend continues on its recent course, the payout ratio in 12 months could be 123%, which is a bit high and could start applying pressure to the balance sheet.

TELUS Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The first annual payment during the last 10 years was CA$0.53 in 2011, and the most recent fiscal year payment was CA$1.31. This implies that the company grew its distributions at a yearly rate of about 9.6% over that duration. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.

Dividend Growth May Be Hard To Achieve

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Unfortunately things aren't as good as they seem. In the last five years, TELUS' earnings per share has shrunk at approximately 4.6% per annum. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits. Earnings are forecast to grow over the next 12 months and if that happens we could still be a little bit cautious until it becomes a pattern.

TELUS' Dividend Doesn't Look Sustainable

In summary, while it's always good to see the dividend being raised, we don't think TELUS' payments are rock solid. Although they have been consistent in the past, we think the payments are a little high to be sustained. This company is not in the top tier of income providing stocks.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, TELUS has 3 warning signs (and 1 which shouldn't be ignored) we think you should know about. We have also put together a list of global stocks with a solid dividend.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.