Today is Tuesday, September 3, 2019, and this is your daily dividend safety update. Today we’re looking at TELUS Corporation (NYSE: TU) stock to see whether its 4.5% dividend is safe.
Let’s look at the company’s payout ratio, cash flow growth, and dividend history to gauge the probability of a dividend cut in the next few years.
Payout Ratio (Dividends/Earnings)
TELUS Corporation has a payout ratio of 68.69%. That’s low enough for us! Payout ratio equals dividends per share divided by earnings per share. A low payout ratio indicates that the company has plenty of money to cover its dividend. We’d be more concerned if the ratio was closer to 100% (or over it).
Cash Flow Growth Year-Over-Year
TELUS Corporation has not grown its cash flow in the last year. That’s a bad omen for dividend investors. No cash flow means no dividend, so if cash flow isn’t growing, that’s a problem for us.
Dividend History & Recent Cuts
TELUS Corporation has a recent history of dividend cuts. In fact, their last dividend cut was this year. That’s not a good sign. Companies that have recently cut their dividend are generally more likely to cut them again.
TELUS Corporation stock has failed 2 of our 3 dividend safety metrics. With that in mind, we believe a dividend cut is likely in the next few years.
Editor’s Note: We’ve been keeping an eye on some dividend stocks that could be better for your income portfolio than TELUS Corporation. These dividends are much bigger — and safer — than the paltry yields many investors settle for. Enter your email below to learn more.