TELUS provides three-year free cash flow growth target

Rhea-AI Summary

TELUS (TSX:TU) updated its capital allocation framework on Dec 3, 2025, announcing a new multi-year free cash flow target and changes to its dividend plan. The company reaffirmed ~$2.15B free cash flow for 2025 and set a preliminary $2.4B FCF target for 2026 with a minimum 10% CAGR in FCF from 2026–2028. TELUS will systematically step down its Discounted DRIP from 2% to 0% by 2028 and pause dividend growth while continuing quarterly dividends at $0.4184 per share. Leverage improved to 3.5x as of Sept 30, 2025, with targets of ~3.3x end-2026 and ~3.0x end-2027, supported by partnerships, hybrid notes, asset divestitures and monetization plans.

Positive

• Free cash flow target of $2.4B for 2026
• FCF minimum 10% CAGR from 2026–2028
• Leverage improved to 3.5x and target ~3.0x by end-2027
• Quarterly dividend maintained at $0.4184 per share

Negative

• Dividend growth model paused until share price/dividend yield improve
• Step-down of Discounted DRIP reduces shareholder reinvestment incentive through 2027
• 2026 capex target of $2.3B may constrain near-term free cash deployment

News Market Reaction

+1.61%

2 alerts

+1.61% News Effect

+$334M Valuation Impact

$21.06B Market Cap

0.2x Rel. Volume

On the day this news was published, TU gained 1.61%, reflecting a mild positive market reaction. Our momentum scanner triggered 2 alerts that day, indicating moderate trading interest and price volatility. This price movement added approximately $334M to the company's valuation, bringing the market cap to $21.06B at that time.

Data tracked by StockTitan Argus on the day of publication.

Key Figures

2025 free cash flow: $2.15 billion 2026 free cash flow target: $2.4 billion FCF growth target: Minimum 10% CAGR +5 more

8 metrics

2025 free cash flow $2.15 billion Expected free cash flow for 2025

2026 free cash flow target $2.4 billion Preliminary free cash flow target for 2026

FCF growth target Minimum 10% CAGR Free cash flow growth from 2026 through 2028

2026 capex target $2.3 billion Capital expenditure target for 2026

Quarterly dividend $0.4184 per share Dividend maintained at most recent level

Leverage ratio current 3.5x Net debt to EBITDA as of September 30, 2025

Leverage target 2026 3.3x Expected net debt to EBITDA by end of 2026

Leverage target 2027 3.0x Net debt to EBITDA goal by end of 2027

Market Reality Check

Price: $13.87 Vol: Volume 6,209,761 is below...

normal vol

$13.87 Last Close

Volume Volume 6,209,761 is below the 20-day average of 7,417,925 (relative volume 0.84x). normal

Technical Shares trade below the 200-day MA of 15.4 and close to the 52-week low of 12.8, well under the 16.735 52-week high.

Peers on Argus

Telecom peers show mixed moves: BCE -0.43%, SATS -1.61%, VIV -2.78%, CHTR -1.22%...

Telecom peers show mixed moves: BCE -0.43%, SATS -1.61%, VIV -2.78%, CHTR -1.22%, while RCI gained 0.28%. This pattern suggests company-specific focus on TELUS rather than a broad sector move.

Historical Context

5 past events · Latest: Dec 09 (Positive)

Pattern 5 events

Date	Event	Sentiment	Move	Catalyst
Dec 09	CX award recognition	Positive	-0.5%	TELUS Digital named leader in 2025 NelsonHall CX transformation report.
Dec 04	Debt offering	Neutral	+1.1%	Priced US$1.5B and CAD$800M junior subordinated notes for refinancing uses.
Dec 04	Debt tender offers	Neutral	+0.6%	Launched cash tender offers for up to C$500M of seven note series.
Dec 03	Capital allocation update	Positive	+1.6%	Set multi‑year free cash flow target and leverage reduction roadmap.
Nov 07	Dividend declaration	Positive	+1.3%	Announced quarterly cash dividend of $0.4184 per common share.

Pattern Detected

Recent TELUS headlines across operations, capital markets, and dividends mostly coincided with modestly positive price reactions, with only one divergence on a positive CX recognition event.

Recent Company History

Over the last few months, TELUS has emphasized capital structure and operational positioning. On Nov 7, it declared a quarterly dividend of $0.4184 per share. On Dec 3, it outlined multi‑year free cash flow and leverage targets, followed by cash tender offers for up to C$500M of notes and junior subordinated note pricings on Dec 4. TELUS Digital was later recognized as a leader in CX transformation on Dec 9. The current announcement builds directly on the Dec 3 capital allocation update.

Market Pulse Summary

This announcement details TELUS’ plan to prioritize free cash flow growth and deleveraging while mod...

Analysis

This announcement details TELUS’ plan to prioritize free cash flow growth and deleveraging while moderating shareholder payouts. The company targets $2.15 billion free cash flow in 2025, $2.4 billion in 2026 and at least 10% annual growth through 2028, alongside leverage objectives of 3.3x in 2026 and 3.0x in 2027. At the same time, it will pause dividend growth and phase out the Discounted DRIP, so investors may focus on execution against these cash flow and leverage milestones.

Key Terms

discounted drip, free cash flow, leverage ratio, hybrid note, +1 more

5 terms

discounted drip financial

"TELUS will systematically step down its Discounted DRIP beginning in early 2026"

A discounted DRIP is a dividend reinvestment plan that automatically uses cash dividends to buy more shares at a price below the current market value. Think of it as an automatic savings plan where your dividend payments are used to buy extra units on sale rather than taking the cash. For investors, this can accelerate compounding and lower average cost per share, but it also increases exposure to the same stock and may affect liquidity.

free cash flow financial

"a new multi-year free cash flow growth target"

Free cash flow is the amount of money a company has left over after paying all its expenses and investing in its business, like buying equipment or updating facilities. It shows how much cash is available to reward shareholders, pay down debt, or save for future growth. This helps investors understand if a company is financially healthy and able to grow.

leverage ratio financial

"reduce its net debt to EBITDA leverage ratio1 to approximately 3-times"

Leverage ratio measures how much a company relies on borrowed money compared with its own funds or assets, typically expressed as debt relative to equity or total assets. Like a homeowner with a mortgage, higher leverage can amplify returns when business is strong but also raises the chance of big losses or default if revenue falls, so investors use it to judge financial risk and resilience.

hybrid note financial

"supported by its successful Terrion partnership, hybrid note issuances"

A hybrid note is a financing instrument that blends features of a loan and an ownership stake: it pays regular interest like a bond but can include options that behave like stock, such as conversion to equity or payments that can be reduced. For investors it matters because hybrids typically offer higher yields than plain debt but carry greater risk of payment cuts or dilution of existing shareholders, so they affect potential return, company credit strength, and ownership stakes.

cash dividend coverage ratio financial

"projections translate into a cash dividend coverage ratio of approximately 75 per cent"

Cash dividend coverage ratio measures how easily a company’s available cash can pay its regular dividend — typically by comparing operating cash flow to the cash amount paid out to shareholders. It matters to investors because a higher ratio is like having several months’ pay saved before covering a monthly bill: it signals the dividend is more likely to continue during lean periods, while a low ratio suggests the payout may be risky or unsustainable.

AI-generated analysis. Not financial advice.

TELUS advances plan to step down Discounted DRIP in 2026 

TELUS pauses dividend growth until share price reflects growth prospects

VANCOUVER, BC, Dec. 3, 2025 /PRNewswire/ - TELUS Corporation ("TELUS" or the "Company") today provided an updated mid-term outlook and further details of its enhanced capital allocation framework, including a new multi-year free cash flow growth target. In addition, TELUS will systematically step down its Discounted DRIP beginning in early 2026 and pause its dividend growth while continuing to pay its quarterly dividend at the most recent level of $0.4184 per share. These actions augment TELUS' plan to reduce its net debt to EBITDA leverage ratio¹ to approximately 3-times by the end of 2027. As of September 30, 2025, the Company's leverage ratio improved to 3.5-times, supported by its successful Terrion partnership, hybrid note issuances, other strategic partnerships and non-core asset divestitures, and continued access to TELUS Digital's strong cash flow generation. We expect further improvement to approximately 3.3-times by the end of 2026, supported by considerable deleveraging initiatives, potential hybrid note offerings and meaningful free cash flow generation.

"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."

Three-year free cash flow growth target
Consistent with our public targets, TELUS expects to generate approximately $2.15 billion in free cash flow¹ in 2025. For the subsequent three years, from 2026 through 2028, TELUS expects to grow its free cash flow at a minimum 10 per cent compounded annual growth rate. Our preliminary target for free cash flow for 2026 is $2.4 billion, with capital expenditure target for 2026 at approximately $2.3 billion.

Concurrently, TELUS' free cash flow projections translate into a cash dividend coverage ratio of approximately 75 per cent of free cash flow on a prospective basis, for each of these three years, consistent with the Company's long-term guideline.

Step-down of Discounted DRIP
TELUS plans a step down of its current Discounted DRIP ("DDRIP") of 2 per cent to a discount of 1.75 per cent for dividends declared in February and May 2026, moving to 1.5 per cent for dividends declared in August and November 2026, and to 1 per cent for dividends declared in 2027, with zero discount starting in 2028. The Company's DDRIP has served as a prudent capital management tool as it navigated a significant investment cycle related to its PureFibre network build, as well as over $4 billion in spectrum purchases since 2019. Dividend decisions will continue to be subject to our Board's assessment and the determination of our financial position and outlook on a quarterly basis.

¹ These are Non-GAAP and other specified financial measures. See Section 11.1 of TELUS' third quarter 2025 MD&A.

Caution regarding forward-looking statements
This news release contains forward-looking statements about expected events and the financial and operating performance of TELUS Corporation. The terms TELUS, the Company, we, us and our refer to TELUS Corporation and, where the context of the narrative permits or requires, its subsidiaries.

Forward-looking statements include any statements that do not refer to historical facts. They include, but are not limited to, statements relating to our objectives and our strategies to achieve those objectives, including the statements in this release regarding our deleveraging plan and expected reduction of our net debt to EBITDA leverage ratio, our current monetization and partnership initiatives, the timing and amount of the step down of our Discounted DRIP, our expected free cash flow in 2025, and our targets for free cash flow growth and resulting dividend coverage ratio projections. These statements are made pursuant to the "safe harbour" provisions of applicable securities laws in Canada and the United States Private Securities Litigation Reform Act of 1995. Disclosure regarding our financial targets is presented for the purpose of assisting our investors and others in understanding certain key elements of our expected financial results in 2025 and future years as well as our objectives, strategic priorities and business outlook. Such information may not be appropriate for other purposes.

Readers are cautioned not to place undue reliance on forward-looking statements as a number of factors could cause actual future performance and events to differ materially from those described in the forward-looking statements. These statements are subject to risks and uncertainties and are made based on our current assumptions, including assumptions about future economic conditions and courses of action. Accordingly, this news release is subject to the disclaimer and the qualifications and should be read together with the risk factors and assumptions set out in our 2024 annual management's discussion and analysis ("MD&A"), and updated in our third quarter 2025 MD&A, and in other TELUS public disclosure documents and filings with securities commissions in Canada (on SEDAR+ at sedarplus.ca) and in the United States (on EDGAR at sec.gov). Quarterly dividend decisions are made by our Board of Directors based on our financial position and outlook.

The forward-looking statements contained in this news release describe our expectations at the date of this news release and, accordingly, are subject to change after such date. Except as required by law, TELUS disclaims any intention or obligation to update or revise forward-looking statements.

About TELUS
TELUS (TSX: T, NYSE: TU) is a world-leading communications technology company operating in more than 45 countries and generating over $20 billion in annual revenue with more than 20 million customer connections through our advanced suite of broadband services for consumers, businesses and the public sector. We are committed to leveraging our technology to enable remarkable human outcomes. TELUS is passionate about putting our customers and communities first, leading the way globally in client service excellence and social capitalism. TELUS Health is enhancing more than 160 million lives across 200 countries and territories through innovative preventive medicine and well-being technologies. TELUS Agriculture & Consumer Goods utilizes digital technologies and data insights to optimize the connection between producers and consumers. TELUS Digital specializes in digital customer experiences and future-focused digital transformations that deliver value for their global clients. Guided by our enduring 'give where we live' philosophy, TELUS, our team members and retirees have contributed $1.8 billion in cash, in-kind contributions, time and programs including 2.4 million days of service since 2000, earning us the distinction of the world's most giving company.

For more information, visit telus.com or follow @TELUSNews on X and @Darren_Entwistle on Instagram.

Investor Relations
Robert Mitchell
ir@telus.com

Media Relations
Steve Beisswanger
Steve.Beisswanger@telus.com

 

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SOURCE TELUS Corporation

FAQ

What free cash flow does TELUS (TU) expect for 2026?

TELUS' preliminary free cash flow target for 2026 is $2.4 billion.

How does TELUS plan to change its Discounted DRIP in 2026–2028?

TELUS will step the DDRIP from 2% to 1.75% (Feb/May 2026), then 1.5% (Aug/Nov 2026), 1% in 2027 and 0% in 2028.

Will TELUS (TU) cut its dividend after the Dec 3, 2025 update?

No—TELUS will continue paying the quarterly dividend at $0.4184 per share but has paused dividend growth.

What leverage targets did TELUS (TU) announce for 2026 and 2027?

TELUS expects leverage of approximately 3.3x by end-2026 and about 3.0x by end-2027.

What FCF growth rate did TELUS (TU) commit to through 2028?

TELUS expects a minimum 10% compounded annual growth rate in free cash flow from 2026 through 2028.

How will TELUS support deleveraging after the Dec 3, 2025 update?

TELUS cited partnerships, hybrid note issuances, non-core asset divestitures and monetization of real estate and copper assets to support deleveraging.