On Tuesday, TD Securities has updated its outlook on TELUS Corp. (T:CN) (NYSE: TU) shares, raising the telecom company's price target to Cdn$27.00 from the previous Cdn$25.00. The firm has sustained its Buy rating on the stock.
The adjustment comes with the introduction of the firm's 2026 estimates, which include a notable reduction in the projected consolidated capital intensity (C/I) for TELUS.
The new capital intensity forecast for 2026 is set at 10.5%, a decrease from the 12.2% anticipated for 2025. TD Securities has adopted a slightly more cautious stance than TELUS management, which is aiming for a C/I of 10% or lower.
The expected decrease in capital expenditures is projected to fuel a high-teens growth in free cash flow (FCF), despite the assumption that EBITDA growth will slow to 4% in 2026.
The conservative estimates reflect limited visibility into the future, leading to a cautious approach towards predicting subscriber, revenue, and EBITDA growth for 2026.
Nonetheless, TD Securities anticipates that TELUS will be able to maintain a 7% dividend growth rate even under conditions of sluggish revenue and EBITDA performance.
The analyst also highlighted potential efficiency gains from fibre and digitization initiatives, as well as the impact of new product deployments in areas such as home automation, healthcare, and 5G connected devices.
Although these factors could contribute to stronger EBITDA growth, the firm has chosen to maintain conservative estimates to underscore the sustainability of dividend growth.
InvestingPro Insights
TELUS Corp. (NYSE: TU) showcases a robust dividend history, with an impressive track record of raising its dividend for 26 consecutive years, reflecting a strong commitment to shareholder returns. Despite analysts' concerns, as evidenced by 7 analysts revising their earnings predictions downwards for the upcoming period, the company's significant dividend yield of 6.93% remains a key attraction for income-focused investors. This dividend yield is particularly notable in the context of the company's current market capitalization of $24.3 billion USD.
Moreover, TELUS is trading at an earnings multiple of 27.39 based on the last twelve months as of Q1 2024, which positions it at a higher valuation compared to some peers. This, combined with the stock trading near its 52-week low, provides a nuanced view for potential investors considering entry points. The InvestingPro platform offers additional insights and analysis on TELUS, including more InvestingPro Tips to help investors make informed decisions. Discover more expert tips and use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, which includes 11 more InvestingPro Tips for a comprehensive investment strategy.
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