Key Takeaways:
TELUS Corp. cut its quarterly dividend 55% to $0.1875 after Q2 earnings missed estimates, sending shares down 12.63% to a 52-week low.
"The macro environment has shifted and we are responding with clarity and discipline," Victor Dodig, president and chief executive officer, said.
Adjusted EPS of $0.16 fell 27% from a year earlier, while adjusted net income dropped 26% to $254 million. Consolidated operating revenue slipped 2% to $4.92 billion. A $2.1 billion non-cash impairment of the TELUS Digital unit drove a net loss of $1.83 billion.
The reset lowers the annual payout to $0.75 per share from $1.6736, generating about $2.7 billion in cumulative cash savings through 2028 to cut net debt to Adjusted EBITDA to 3.0 times or lower by year-end 2028, a year later than planned.
The dividend, payable Oct. 1 to holders of record Sept. 10, was cut after adjusted EPS of $0.16 missed the $0.17 consensus by nearly 30 percent, and revenue of $3.561 billion fell short of the $3.760 billion estimate. TELUS also removed the discount on its dividend reinvestment plan effective Oct. 1, reducing shareholder dilution.
Consolidated service revenue declined 1 percent to $4.4 billion, and adjusted EBITDA fell 2 percent to $1.8 billion. Mobile network revenue rose 1 percent to $1.7 billion on subscriber growth, but average revenue per user slipped 0.4 percent to $56.36 and churn edged up to 1.08 percent from 1.06 percent on promotional price competition. TTech subscriber connections grew 6 percent to 17.9 million.
TELUS Health revenue rose 4 percent, with healthcare lives covered reaching 158.9 million, up 1.8 million over 12 months. TELUS Digital revenue dropped 10 percent on client ramp-downs in trust and safety and AI data solutions, triggering the impairment as the recoverable amount of the cash-generating unit fell below its carrying value. The company is running a strategic portfolio review, including monetizing non-core TELUS Health assets and real estate.
Full-year guidance was cut sharply. Consolidated service revenue growth is now seen flat to down 2 percent, from 2 to 4 percent, and adjusted EBITDA is expected to contract 2 to 4 percent, from growth of 2 to 4 percent. Capital expenditures were raised to about $2.6 billion from $2.3 billion on inflation and supply chain costs, while free cash flow guidance was pulled to about $1.8 billion from $2.45 billion.
The dividend cut and lowered outlook signal weaker near-term cash generation, pressuring income-focused holders as the company prioritizes deleveraging over shareholder yield. Investors will watch the third-quarter results in November for details on the capital returns framework and the outcome of the portfolio review.
This article is for informational purposes only and does not constitute investment advice.
