TELUS (TSE:T) Is Paying Out A Larger Dividend Than Last Year

TELUS Corporation's (TSE:T) dividend will be increasing from last year's payment of the same period to CA$0.4163 on 2nd of July. This makes the dividend yield 7.7%, which is above the industry average.

Our free stock report includes 2 warning signs investors should be aware of before investing in TELUS. Read for free now.

TELUS' Projections Indicate Future Payments May Be Unsustainable

If the payments aren't sustainable, a high yield for a few years won't matter that much. Before making this announcement, the company's dividend was much higher than its earnings. It will be difficult to sustain this level of payout so we wouldn't be confident about this continuing.

Over the next year, EPS is forecast to expand by 106.5%. However, if the dividend continues along recent trends, it could start putting pressure on the balance sheet with the payout ratio reaching 107% over the next year.

See our latest analysis for TELUS

TELUS Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The annual payment during the last 10 years was CA$0.76 in 2015, and the most recent fiscal year payment was CA$1.67. This works out to be a compound annual growth rate (CAGR) of approximately 8.2% a year over that time. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.

Dividend Growth Potential Is Shaky

The company's investors will be pleased to have been receiving dividend income for some time. Let's not jump to conclusions as things might not be as good as they appear on the surface. TELUS' EPS has fallen by approximately 11% per year during the past five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn't be feeling too comfortable.

TELUS' Dividend Doesn't Look Sustainable

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. Although they have been consistent in the past, we think the payments are a little high to be sustained. Overall, we don't think this company has the makings of a good income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 2 warning signs for TELUS that you should be aware of before investing. Is TELUS not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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