S&P Drops TELUS From Canadian Dividend Aristocrats Index After Dividend Slashed 55%

TELUS Corp. (TSX: T) has been stripped of its dividend aristocrat status.

S&P Dow Jones Indices said the telecom will be removed from the S&P/TSX Canadian Dividend Aristocrats Index before the open on Sept. 1, a change that surfaced through the index provider’s routine monthly dividend review. The announcement named no replacement.

The reason is straightforward. Membership requires a company to raise its regular cash dividend every year for at least five consecutive years. TELUS did the opposite, resetting its quarterly payout to 18.75 cents a share from 41.84 cents, a cut of roughly 55 per cent, effective Oct. 1. One reduction is enough to end a streak, regardless of how long it ran.

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The removal is more than symbolic. Index membership pulls in passive money, most visibly through the iShares S&P/TSX Canadian Dividend Aristocrats Index ETF, and funds tracking the benchmark have to sell what the index drops. TELUS also terminated the discount on its dividend reinvestment plan as of the same date, closing another avenue for shareholders to add stock on favourable terms.

Management framed the cut as a balance sheet decision rather than a distress signal. The company expects the reset to preserve about $2.7 billion in cash through 2028, earmarked for paying down debt. Net debt stood at 3.5 times adjusted EBITDA at quarter-end, against a target of 3.0 times or lower by the end of 2028, which is a goal that was already pushed out by a year.

Second quarter results underlined the pressure. Revenue fell 3 per cent to $4.9 billion, adjusted EBITDA slipped 2 per cent, and the company booked a $1.8-billion net loss driven by a $2.1-billion non-cash writedown at TELUS Digital. Full-year free cash flow guidance was trimmed to roughly $1.8 billion from $2.45 billion, with competitive pricing and slower population growth cited among the culprits.

Telus last traded at $13.58 on the TSX.