High-Yield Telecom Stock is Making Big Bets on AI Innovation

TELUS Corporation (NYSE: TU) is one of those classic dividend stocks that makes your smartphone stream without a hitch, turns doctor’s visits into a video call, and makes your portfolio churn out steady income like clockwork .

The Canadian telecom titan weaves wireless, broadband, and digital health into a dividend machine with a stellar 7.6% forward yield, trouncing peers like Verizon’s (NYSE: VZ) 6.30% yield. 

With a beefy network, a telehealth kicker, and bold bets on AI-driven growth, TELUS is wired to dominate Canada’s $50 billion telecom market, dishing out reliable cash for income-hungry investors.

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Operational Overview and Recent Earnings

TELUS keeps Canada buzzing, powering phones, internet, and TV while expanding its competitive scope into telehealth and digital solutions (and more - keep reading for its unique forays into AI-powered automation!). 

Its telecom arm, 87% of revenue, maintains a steady base of wireless and wireline services, while ventures like TELUS Health add growth upside.

In Q1 2025, revenue climbed 3% to $3.7 billion, and consolidated EBITDA jumped 6% to $1.3 billion. 

The firm added 20,000 wireless customers and 50,000 wireline users, including 21,000 broadband subscribers, proving its pull in a crowded market.

To be fair, wireless revenue dipped 1%, and a 4% drop in average revenue per user stung, though wireline revenue grew 2%. 

TELUS Health, however, stole the show, soaring 12% year-over-year, while cost cuts kept adjusted EBITDA margins at a healthy 36%.

Capital spending fell 19% to $587 million, or 13% of sales, freeing up cash. 

Despite a competitive landscape, TELUS’ diversified playbook kept free cash flow steady at $400 million, up 5%, helping ensure continued dividend reliability. 

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TELUS/PowerFleet Partnership Bolsters AI Innovation

TELUS isn’t content to rest on its telecom laurels.

It’s swinging big in smaller growth sectors, much like AT&T’s (NYSE: T) bold bet on AST SpaceMobile (NASDAQ: ASTS) to beam broadband from satellites - a bet that’s paying off big in recent weeks as ASTS nearly doubled since January. 

Earlier this year, TELUS teamed up with PowerFleet (NASDAQ: AIOT) to roll out AI-driven warehouse solutions across North America, a move that signals a willingness to expand into next-gen tech without falling for the AI vaporware that has trapped many out-of-touch execs. 

PowerFleet’s tech uses AI to boost safety and efficiency, cutting injury costs by 20%.

TELUS’ 20 million customer connections and 5G network juice PowerFleet’s reach, targeting a $5 billion warehouse tech market growing 15% yearly. 

Like AT&T’s wager on AST’s unproven space tech, TELUS is banking on PowerFleet’s niche to unlock scalable revenue, potentially adding $50 million to sales by 2027. 

With 49% of warehouses eyeing AI upgrades, this partnership positions TELUS as a digital transformation leader, even if early profits are slim.

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Dividend Profile

The telecom stock’s dividend is a cash machine, churning out ~$0.41 quarterly, or $1.65 yearly, for a hefty 7.6% yield at today’s pricing.

A 7% annual hike since 2013, with a 5% bump in 2025, proves it’s built to last. 

An 80% payout ratio, backed by $1.5 billion in annual free cash flow, and Q1’s $400 million cash flow, up 5%, keep it rock-solid.

Fiber savings and TELUS Health’s growth could fuel 6-8% raises, making TELUS a dividend darling for investors wanting a little AI-powered growth in their income portfolio.

Bear Case

• Quebecor’s pricing war could trim wireless revenue. 

• Canadian regulations might cap pricing power. 

• Non-telecom bets like Powerfleet could fizzle, draining cash. 

• A macro slowdown might cut subscriber adds. 

• Debt at 3.9x EBITDA risks a dividend trim if cash tightens. 

• Fixed-wireless broadband could nick wireline share.

AI-Meets-Income Investing with TELUS

TELUS’ Q1 2025 was a masterclass in grit, with 3% revenue growth and a 36% EBITDA margin despite Quebecor’s punches.

A 4% revenue growth forecast, fueled by $50 billion in telecom demand and 12% TELUS Health gains, taps a $60 billion market. 

With $1 billion in cash and $1.5 billion free cash flow, TELUS is wired to soar, pushing margins to 39% by 2029. 

Its 7.6% yield, a telecom gem, and 27% wireless share lock in cash flow, while Powerfleet’s AI gamble could be a major growth catalyst in an emerging sector.