TELUS (TSE:T) Is Increasing Its Dividend To CA$0.3891

TELUS Corporation's (TSE:T) dividend will be increasing from last year's payment of the same period to CA$0.3891 on 2nd of July. This will take the annual payment to 6.8% of the stock price, which is above what most companies in the industry pay.

View our latest analysis for TELUS

TELUS Is Paying Out More Than It Is Earning

If the payments aren't sustainable, a high yield for a few years won't matter that much. Based on the last payment, the company wasn't making enough to cover what it was paying to shareholders. Without profits and cash flows increasing, it would be difficult for the company to continue paying the dividend at this level.

The next 12 months is set to see EPS grow by 156.5%. If the dividend continues on its recent course, the payout ratio in 12 months could be 124%, which is a bit high and could start applying pressure to the balance sheet.

TELUS Has A Solid Track Record

The company has an extended history of paying stable dividends. The dividend has gone from an annual total of CA$0.68 in 2014 to the most recent total annual payment of CA$1.5. This works out to be a compound annual growth rate (CAGR) of approximately 8.3% 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

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Unfortunately things aren't as good as they seem. TELUS' earnings per share has shrunk at 18% a year over the past five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. Over the next year, however, earnings are actually predicted to rise, but we would still be cautious until a track record of earnings growth can be built.

TELUS' Dividend Doesn't Look Sustainable

Overall, we always like to see the dividend being raised, but we don't think TELUS will make a great income stock. Although they have been consistent in the past, we think the payments are a little high to be sustained. We don't think TELUS is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 5 warning signs for TELUS (2 shouldn't be ignored!) 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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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.