A Canadian Dividend Stock Down 17% to Buy Forever

Canada’s big telecom stocks are often regarded as some of the best investments for long-term investors. There are more than a few reasons for that. First, there’s the appeal of owning a Canadian dividend stock that provides a reliable yield. Then there’s also the defensive appeal of telecom stocks themselves.

But which telecom is the ideal Canadian dividend stock to own right now?

Enter Telus (TSX:T).

Telus is one of the big telecoms and boasts a portfolio of subscriber-based services that generate a reliable and recurring source of revenue. That revenue stream has allowed Telus to pay out one of the best dividends on the market for well over two decades.

But despite the defensive appeal of providing essential services, the stock has struggled in recent years. In fact, the stock is down a whopping 17% over the past year. As the stock price has dipped, Telus’s yield has swelled.

Does this make Telus a good opportunity right now?

Why Telus is down 17%

The recent share price dip is tied to larger macroeconomic pressures rather than a company‑specific failure on the part of Telus. Telecoms like Telus are capital‑intensive, meaning that they are heavily reliant on borrowing to fund network expansion and infrastructure upgrades.

As interest rates rose sharply over the past several years, the cost of borrowing also increased. That put added cost pressure on Telus, leading to a dip in the stock price as investors rotated out of defensive sectors into growth holdings.

Telus has also been working through a period of elevated capital expenditures as it expands its fibre network and invests in digital services. While these do support long‑term growth, they temporarily weigh heavily on free cash flow.

Combined with slower subscriber growth and a more cautious consumer environment, these factors have contributed to the stock’s 17% decline. In fact, looking out over a longer five-year period shows Telus’s stock price decline at a staggering 34%.

Investors should note that, above all, none of these issues points to structural weakness in the business. If anything, Telus is mitigating its current risk through a variety of factors.

Why Telus remains a reliable Canadian dividend stock

Despite the headwinds, Telus continues to demonstrate the qualities of a Canadian dividend stock that income investors value. Telus continues to benefit from its reliable, recurring revenue stream from its subscriber business.

If anything, the appeal of that segment has grown in recent years as those subscriber services, particularly the internet and wireless segments, have become a necessity for most.

Further to this, the strong national footprint that Telus offers ensures recurring revenue and low customer churn from across the country.

Finally, there’s Telus’s move to diversify beyond its traditional telecom segments. Telus offers a variety of digital solutions in niche markets such as health and agriculture. This adds an additional complementary revenue stream that continues to see strong growth.

What about that 9.8% yield?

As Telus’s stock price dipped, the yield soared. As of the time of writing, Telus offers a massive 9.8% yield, making it one of the best-paying dividends on the market. That high yield raises questions about sustainability, and Telus has moved to shore up its dividend and make it more sustainable in the past year.

That includes freezing the company’s long-standing cadence of providing increases. Telus has, however, stopped short of slashing its dividend.

As Telus moves past this peak investment cycle, capital expenditures are expected to moderate. This coincides with expected drops in interest rates.

Over time, this shift could support stronger free cash flow in the years ahead. Concurrently, growth from Telus’s digital services teams will continue to grow, helping to balance the capital needs of the core telecom business.

In short, Telus offers one of the highest yields on the market, backed by multiple segments that are both stable and growing.

Why long‑term investors may want to buy Telus now

Long-term investors should look at the current 17% pullback as an opportunity for a compelling entry point. The long-term fundamentals of the company are sound, and both the digital and core subscription businesses continue to see strong growth.

As interest rates continue to decline, the stock price should recover, providing upside to more patient investors.

In my opinion, Telus is a Canadian dividend stock that should form a small part of any well-diversified portfolio.

The post A Canadian Dividend Stock Down 17% to Buy Forever appeared first on The Motley Fool Canada.

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More reading

• Telus vs. Rogers: 1 Canadian Telecom Stock I’d Buy Today
• The Smartest Way to Invest $10,000 in Your TFSA Right Now
• One TSX Dividend Stock That Might Have More Upside in 2026 Than Most People Expect
• 2 Canadian Stocks That Pay You While You Wait
• The 2 Best TSX Stocks to Buy Before They Recover

Fool contributor Demetris Afxentiou has no position in any of the stocks mentioned. The Motley Fool recommends TELUS. The Motley Fool has a disclosure policy.