Highlights

  • TELUS outlines new multi-year free cash flow growth target beginning 2026.
  • Company pauses dividend growth while maintaining current quarterly payout.
  • Updated leverage goals include reducing ratio to about 3-times by end-2027.

TELUS Corporation (TSE:T) released an updated mid-term outlook and a revised capital allocation framework. The Company announced actions centered on free cash flow growth, leverage reduction, and dividend policy adjustments. These developments follow the Company’s recent performance data dated December 01, 2025, with leverage levels continuing to improve across 2025.

TELUS intends to begin a systematic step-down of its Discounted Dividend Reinvestment Plan (Discounted DRIP) starting in early 2026. The Company also expects to pause dividend growth while maintaining its quarterly dividend at $0.4184 per share. TELUS stated that these steps align with its objective of reducing its net debt to EBITDA leverage ratio to approximately 3-times by the end of 2027.

As of September 30, 2025, the leverage ratio stood at 3.5-times. TELUS attributes this improvement to its Terrion partnership, hybrid note issuances, non-core asset divestitures, and cash flow generation within TELUS Digital. The Company anticipates further progress toward approximately 3.3-times by year-end 2026.

Management Commentary

“TELUS is advancing its capital allocation strategy, supported by strong business fundamentals and significant free cash flow generation,” said Darren Entwistle, President and CEO of TELUS. “Our confidence in delivering free cash flow growth at a minimum 10 per cent compounded annual growth rate through 2028 reflects our strong financial momentum. Additionally, we are executing on our clearly defined plan to advance and systematically step down the Discounted DRIP beginning in Q1 2026. Importantly, it is our intention to continue paying the dividend at its current nominal level. We will, however, moderate our dividend growth model of 3 to 8 per cent according to our dividend yield, including pausing our dividend growth until such time as our share price and associated dividend yield better reflects the considerable growth prospects of TELUS. These actions will be augmented by a range of opportunities that we are actively pursuing, including a strategic partner for TELUS Health and accelerated monetization of considerable real estate and copper assets. Collectively, these undertakings reinforce our strong progress on deleveraging, with our leverage ratio expected to reach approximately 3.3-times by the end of 2026 as we advance toward our target of approximately 3-times by the end of 2027.”

Free Cash Flow and Dividend Coverage Outlook

TELUS expects to generate approximately $2.15 billion in free cash flow in 2025. From 2026 through 2028, the Company targets a minimum free cash flow compound annual growth rate of 10 per cent. TELUS' preliminary target for 2026 free cash flow is $2.4 billion, with capital expenditures planned at around $2.3 billion.

The Company anticipates a dividend coverage ratio of roughly 75 per cent of free cash flow over the next three years. TELUS stated this aligns with its long-term framework.

Step-Down Schedule for Discounted DRIP

The Discounted DRIP will decline from the current 2 per cent rate to 1.75 per cent for dividends declared in February and May 2026. For dividends declared in August and November 2026, the discount will move to 1.5 per cent. It will fall to 1 per cent for dividends declared in 2027, and the discount will be removed entirely starting in 2028. TELUS noted that dividend decisions remain subject to Board review each quarter.

Shares of T last traded at CAD 18.27 on December 03 2025.