TELUS (TSE:T) Has Announced That It Will Be Increasing Its Dividend To CA$0.3636

TELUS Corporation (TSE:T) has announced that it will be increasing its dividend from last year's comparable payment on the 4th of July to CA$0.3636. This makes the dividend yield about the same as the industry average at 5.0%.

View our latest analysis for TELUS

TELUS' Earnings Easily Cover The Distributions

We aren't too impressed by dividend yields unless they can be sustained over time. Based on the last payment, the company wasn't making enough to cover what it was paying to shareholders. It will be difficult to sustain this level of payout so we wouldn't be confident about this continuing.

EPS is set to grow by 62.3% over the next year. Assuming the dividend continues along recent trends, our estimates say the payout ratio could reach 92% - on the higher side, but we wouldn't necessarily say this is unsustainable.

TELUS Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The annual payment during the last 10 years was CA$0.61 in 2013, and the most recent fiscal year payment was CA$1.4. This works out to be a compound annual growth rate (CAGR) of approximately 8.7% a year over that time. 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 Come By

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, initial appearances might be deceiving. In the last five years, TELUS' earnings per share has shrunk at approximately 5.1% 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.

The Dividend Could Prove To Be Unreliable

Overall, we always like to see the dividend being raised, but we don't think TELUS will make a great income stock. In the past the payments have been stable, but we think the company is paying out too much for this to continue for the long term. Overall, we don't think this company has the makings of a good income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 3 warning signs for TELUS (of which 2 are concerning!) you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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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.