Should You Buy This TSX Dividend Stock for its 9.1% Yield?

Buying and holding high-yield TSX dividend stocks can enhance the income potential of your portfolio. However, investors should exercise caution, as in some cases an unusually high yield may signal underlying business pressures or an unsustainable payout policy rather than a straightforward income opportunity. Against this backdrop, one TSX stock currently attracting attention is Telus (TSX:T), which offers a dividend yield of approximately 9.1%.

Historically, Telus has shown a strong commitment to returning capital to shareholders. Since 2004, the company has distributed roughly $30 billion through dividends and share repurchases. Of that total, about $25 billion was paid as dividends.

Despite this solid track record of dividend payments, recent developments have introduced uncertainty over future payouts. In December of last year, Telus announced a pause in its dividend growth program. Although the company maintained its quarterly dividend at $0.4184 per share, the suspension of further increases marks a shift from its prior pattern of regular dividend growth. The absence of dividend growth raises questions about the sustainability of future payouts.

What’s ahead for Telus’s payouts?

Telus’s move to pause its dividend growth program is aimed at accelerating balance-sheet deleveraging, improving financial flexibility, and strengthening the foundation for sustainable long-term growth. By moderating capital returns, Telus is strengthening its capacity to navigate a competitive operating environment.

The broader backdrop for Canada’s telecommunications sector remains challenging. Intensifying competition has put pricing under pressure and compressed industry margins. Nonetheless, Telus’s extensive wireless infrastructure, expanding PureFibre network, and focus on profitable customer growth position it to capitalize on demand trends in 2026 and beyond and maintain its payouts.

Telus delivered 1.1 million net customer additions across mobile and fixed in 2025. This total included record connected device net additions of 716,000, mobile phone net additions of 207,000, and fixed net additions of 158,000. The fixed-line performance marked the company’s 16th consecutive year of positive wireline net additions. These results reflect the strength of Telus’s bundled mobile and home offerings, the competitive advantages of its fibre network footprint, and the quality of its 5G wireless platform.

Customer loyalty remains a key differentiator for Telus. It reported industry-leading postpaid mobile phone churn of 0.97% for the full year 2025, extending its streak to 12 consecutive years below the 1% threshold.

Further, Telus generated record free cash flow of $2.2 billion in 2025, an 11% year-over-year increase. Management expects double-digit free cash flow growth through 2028, strengthening the company’s capacity to fund capital investments, reduce leverage, and support shareholder returns.

Based on the current quarterly dividend, Telus’s cash dividend payout ratio stands at approximately 70%. Management has indicated the payout ratio could stay at similar levels in the near future.

Is Telus stock a buy for its 9.1% yield?

Telus’s portfolio of high-quality telecommunications assets, an expanding fibre network, and steady subscriber growth augur well for growth. In addition, management has prioritized deleveraging, positioning the balance sheet for gradual improvement. Capital expenditures are expected to moderate in the coming periods, which should enhance earnings and free cash flow generation, thereby supporting dividend sustainability.

Improving free cash flow, combined with ongoing asset monetization initiatives, is expected to accelerate debt reduction and further strengthen the company’s financial position. However, the pause in dividend growth, the competitive telecom environment, and the ultra-high yield of 9.1% warrants caution.

In short, if you’re mainly investing for income and are okay with some moderate risk and no dividend growth in the near future, Telus might be a reasonable stock to hold or buy. However, if you prefer safer investments with steadily increasing dividends, it may be better to wait until the company significantly reduces its debt and resumes consistent dividend growth before buying.

The post Should You Buy This TSX Dividend Stock for its 9.1% Yield? appeared first on The Motley Fool Canada.

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More reading

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• Haters Gonna Hate, and Smart Investors Gonna Buy
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• 2 Safer, High-Yield Dividend Stocks for Canadian Retirees

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