#Canada #Vancouver, BC #dividend growth #Free Cash Flow #TELUS Corporation

TELUS Corporation Sets Free Cash Flow Goals

On December 3, 2025, TELUS Corporation, a prominent Canadian communications technology firm, unveiled its updated mid-term outlook alongside enhanced details on its capital allocation strategy. Central to this update is the introduction of a new multi-year free cash flow growth target, signaling TELUS's robust business fundamentals and future ambitions.

Three-Year Free Cash Flow Growth Target

TELUS has set a preliminary target to generate approximately $2.15 billion in free cash flow for 2025. This projection serves as the baseline for an ambitious plan; the company anticipates a compounded annual growth rate of at least 10% for free cash flow from 2026 to 2028. Specifically, TELUS aims for around $2.4 billion in free cash flow during 2026, aligning its capital expenditures to roughly $2.3 billion.

This strategic focus is expected to yield a cash dividend coverage ratio of about 75% against free cash flow for each of these three years, which is in line with its long-term guidelines. This move not only demonstrates TELUS's commitment to creating value for its stakeholders but also its confidence in navigating future uncertainties.

Pause in Dividend Growth

In a significant development, TELUS is pausing its dividend growth strategies, maintaining its current dividend rate at $0.4184 per share as the company assesses its growth prospects and share performance. This decision comes as TELUS acknowledges the present need for its share price to reflect the company’s robust growth potential before resuming a more aggressive dividend increase strategy, which had previously been targeted at 3% to 8%.

The company's administration, led by President and CEO Darren Entwistle, reiterated the importance of this pause, stating that it is essential for aligning the dividend policy with the company's sustainable financial momentum and overall business gains.

Strategic Steps for Deleveraging

Another cornerstone of TELUS's updated strategy is its plan to systematically reduce its Discounted Dividend Reinvestment Plan (DDRIP). This initiative will proceed with rate adjustments from 2% down to 1% by 2027, ultimately phasing out any discounts by 2028. These steps crucially support the company’s objectives to decrease its net debt-to-EBITDA leverage ratio to below 3 times by 2027.

As of the end of September 2025, TELUS managed to improve this ratio to 3.5 times. This achievement was aided by multiple strategic collaborations, including its partnership with Terrion, alongside hybrid note issuances and divestitures of non-core assets. TELUS expects to further lower the ratio to around 3.3 times by 2026 as it accelerates its deleveraging efforts and generates substantial free cash flow.

Commitment to Shareholders

The company’s pledge to maintain dividends despite the pause in growth reflects TELUS's broader commitment to shareholders. This is reinforced through its ongoing evaluations and assessments conducted quarterly by the Board of Directors, ensuring that dividend decisions align with TELUS's financial health and future outlook.

As TELUS moves forward with its strategic initiatives, the company remains focused on advanced partnerships, including an enhanced strategic outlook for TELUS Health and accelerated monetization of significant real estate and copper asset holdings.

Conclusion

In summary, TELUS Corporation is setting itself up for sustainable growth through a rigorous approach to cash flow management and capital allocation, while ensuring steady returns for its investors. The combination of its ambitious free cash flow targets and strategic reassessments are poised to strengthen TELUS's market position and facilitate long-term profitability, even in the face of fluctuating market conditions. The path forward is one marked by both caution and opportunity, guided by TELUS’s steadfast commitment to innovation and superior customer service.