TELUS' (TSE:T) Upcoming Dividend Will Be Larger Than Last Year's

TELUS Corporation's (TSE:T) dividend will be increasing from last year's payment of the same period to CA$0.3636 on 4th of July. This makes the dividend yield about the same as the industry average at 5.7%.

Check out our latest analysis for TELUS

TELUS' Dividend Is Well Covered By Earnings

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.

Earnings per share is forecast to rise by 62.3% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could reach 93%, which is on the higher side, but certainly still feasible.

TELUS Has A Solid Track Record

The company has an extended history of paying stable dividends. The annual payment during the last 10 years was CA$0.61 in 2013, and the most recent fiscal year payment was CA$1.45. This works out to be a compound annual growth rate (CAGR) of approximately 9.1% a year over that time. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.

Dividend Growth May Be Hard To Come By

Investors could be attracted to the stock based on the quality of its payment history. Unfortunately things aren't as good as they seem. In the last five years, TELUS' earnings per share has shrunk at approximately 5.2% 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

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.

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 2 which are a bit unpleasant) we think you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.