TELUS Cuts Dividend 55% as Shares Plunge 12%

TELUS Corporation (TSX: T) used its first quarterly report under new CEO Victor Dodig to dismantle several financial commitments inherited from the company’s previous strategy, cutting its dividend by 55%, reducing its 2026 outlook, delaying its debt target, and recording a $2.1 billion impairment against TELUS Digital.

The combined reset sent TELUS shares down 11.9% to $13.28 by 10:37 a.m. ET on Friday. The stock fell as low as $12.93, its lowest price in at least 52 weeks, while trading volume had already reached 20.1 million shares against a daily average of 8.6 million.

TELUS reduced its quarterly dividend to $0.1875 per share from $0.4184. That lowers the annualized payout to $0.75 from $1.6736.

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The new dividend will be paid October 1 to shareholders of record on September 10. TELUS expects the reduction to preserve approximately $2.7 billion in cash through 2028, with those funds directed toward debt repayment.

The company also replaced its previous dividend payout target of 60% to 75% of prospective free cash flow with a range of 45% to 60% of trailing 12-month free cash flow. Its discounted dividend reinvestment plan will end October 1, eliminating a program that issued shares at a reduced price and contributed to shareholder dilution.

TELUS had paused dividend growth in December 2025 but maintained the quarterly payment at $0.4184 through the first half of 2026. Friday’s announcement withdraws the dividend growth model entirely.

The dividend cut arrived despite quarterly free cash flow increasing 2% to $545 million.

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The more consequential change was TELUS’s full-year forecast. Expected 2026 free cash flow was cut to approximately $1.8 billion from $2.45 billion, a reduction of about 27%. Capital expenditure guidance increased to approximately $2.6 billion from $2.3 billion.

TELUS now expects annual service revenue growth between zero and negative 2%, reversing its previous forecast for growth of 2% to 4%. Adjusted EBITDA is expected to decline between 2% and 4%, compared with the previous target for growth of 2% to 4%.

Q2 operating revenue and other income declined to $4.9 billion from $5.1 billion. Adjusted EBITDA fell 2% to $1.8 billion, adjusted net income dropped 26% to $254 million, and adjusted earnings per share declined 27% to $0.16. Cash from operations increased 15% to $1.3 billion, partly because of lower tax payments and working-capital movements.

TELUS reported a $1.8 billion net loss after recording a $2.1 billion pre-tax impairment against the goodwill and intangible assets assigned to TELUS Digital. The digital division’s external revenue declined 10% to $654 million, while adjusted EBITDA fell 20% to $72 million. The company attributed the weakness to client reductions in trust and safety services, AI and data work, and unfavourable currency movements.

The write-down came nine months after TELUS completed a US$539 million transaction to buy the remaining shares of TELUS Digital and take the subsidiary private.

Net debt stood at 3.5 times adjusted EBITDA at quarter-end. TELUS retained its target of approximately three times or lower but postponed the deadline from the end of 2027 to the end of 2028.

The company attributed that delay to competitive pricing pressure and weaker subscriber demand associated with slower population growth. TELUS is also reviewing non-core TELUS Health investments and real estate for potential sales, with proceeds intended for debt reduction.

Restructuring costs are now expected to reach approximately $900 million in 2026, up from the previous assumption of $500 million. Estimated cash restructuring payments increased to $650 million from $450 million.

Dodig, who became CEO on July 1, said the company’s focus was on “disciplined execution and ensuring maximum returns on every dollar of capital we deploy.” TELUS plans to provide a more detailed capital allocation and corporate strategy with its third-quarter results in November.