TELUS Stock Plummets 35%—Is This a Contrarian Opportunity?

UPDATE: TELUS stock has just plunged over 35% from its 2022 highs, raising alarms among investors about this household name in the telecom sector. This dramatic decline makes TELUS one of the worst-performing major telecom stocks on the TSX in recent years, but it may also present a rare contrarian investment opportunity.

As of now, market concerns are centered around slowing subscriber growth, increasing debt costs, and fears about the sustainability of its dividend. These issues are significant, but they also create a compelling case for investors willing to look beyond the immediate challenges.

Latest earnings reports from TELUS reveal that while the company’s performance isn’t dazzling, it is far from disastrous. The telecom giant recently announced its first-quarter earnings for 2025, showing a rise in adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA), along with revenue growth. Notably, free cash flow surged by an impressive 22%, and TELUS has reaffirmed its financial targets for the year.

This surge in free cash flow is critical as TELUS continues to evolve beyond traditional telecom services. The company has invested significantly in Telus Health, a tech-focused platform now reaching over 60 million lives across North America. This segment is achieving double-digit growth, providing a robust growth engine that distinguishes TELUS from its competitors.

Investors should also note the company’s dividend payout of $1.67 per share annually, translating to a yield exceeding 7.4% at current prices. This yield is among the highest for a blue-chip stock on the TSX, although critics caution that the payout may not be sustainable amid cash flow challenges. However, TELUS management stands firm in its commitment to maintaining its dividend policy.

Another factor to consider is TELUS’s debt situation. The company does carry some debt, and interest payments have risen, but it has strategically staggered its maturities to avoid a potential refinancing crisis. With valuable long-term assets such as its fiber network and wireless spectrum, TELUS maintains a strong foundation for generating reliable earnings, even in challenging economic conditions.

The bottom line? TELUS remains a major player with millions of loyal subscribers and a growing health business, despite facing headwinds. The market appears to have priced in a worst-case scenario, creating a potential contrarian opportunity for savvy investors.

While investing in beaten-down giants like TELUS might not be the most glamorous choice, it could prove to be a strategic move. Stocks with a 7.5% yield, stable revenue, and an expanding tech division should not be trading at multi-year lows.

This investment is not intended for quick gains but rather a long-term strategy, betting that TELUS will adapt, stabilize, and grow. As others remain focused on past problems, contrarians now have the chance to buy at a bargain price, making TELUS one of the best investment opportunities on the TSX today.

For those considering investing in TELUS, it’s crucial to evaluate the broader market and alternative options as well. The Motley Fool Stock Advisor Canada team has identified other top stocks for 2025 that may outperform TELUS, emphasizing the importance of informed decision-making in your investment strategy.