Notably, the TSX has several fundamentally strong companies that offer reliable dividend payments and high yields. Against this backdrop, here is a top Canadian stock with an 8.1% dividend yield that I have been buying and holding for decades.
The dividend share with a yield of 8.1%
Although several Canadian companies pay reliable dividends, Telus (TSX:T) is an attractive investment due to its high returns and resilient payouts. It has been paying and increasing its dividend for years. The communications giant introduced its multi-year dividend growth program in 2011 and has repeatedly increased its payouts several times since.
Notably, Telus has returned more than $28 billion to investors since 2004, including more than $23 billion through dividends and another $5.2 billion through share buybacks.
Telus recently expanded its dividend growth program for the fifth time, with a target of 3% to 8% annual dividend growth through 2028. T shares offer a quarterly dividend of $0.416 per share, which translates to a high yield of 8.1%, one of the highest among top Canadian stocks.
Telus needs to pay and increase its dividend
Telus is well positioned to continue paying and increasing its dividend in the coming year. Naturally, Telus’s high efficiency raises concerns about sustainability. However, Telus appears well positioned to maintain its payouts. The company has focused on reducing its debt burden, moderating capital expenditures and driving profitable growth. These factors will support the company’s ability to continue rewarding shareholders.
The telecom company maintains a sustainable payout ratio, typically between 60% and 75% of free cash flow, leaving enough flexibility to reinvest in the business while rewarding shareholders. This covers payouts and provides capital to focus on growth opportunities.
The company’s diverse and growing portfolio of services bodes well for future growth. While increased competition impacts Telus’ margins, the bundled services are resonating with consumers and driving subscriber growth and improving customer retention. Additionally, the expansion of TELUS PureFibre connectivity among Canadian households and businesses will support its growth. Telus has consistently maintained a low postpaid churn rate of less than 1%, reflecting its ability to offer superior networks and services.
Telus has transformed itself into a diversified digital services company. TELUS Health has emerged as a key driver of growth and profitability, driven by sales channel expansion, product improvements and effective cost management. Furthermore, the company’s AI-driven smart home energy management and affordable security and entertainment services further strengthen its market position and create new revenue streams.
Additionally, Telus’ focus on reducing debt, divesting non-core assets and improving operating efficiencies allows Telus to generate stable revenues to support payouts. Additionally, with much of the heavy network investment behind it, management expects capital expenditures to decline, paving the way for a meaningful increase in free cash flow that will support payouts.
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