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TELUS 
annual report
FAQs
FAQ #2
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FAQ number: 1 2 3 4 5 6 7 8 9 Why did TELUS reduce its dividend by 57% starting in 2002? Was the decision due to financial difficulty? The October 2001 decision to reduce the dividend of TELUS from 35 cents to 15 cents per quarter is consistent with the Company’s current business profile and focused growth strategy. The reduction of our dividend reflects our view that the best allocation of capital for TELUS is to increase the proportion of internally generated funds reinvested into our growth operations. The decision was made from a position of financial strength as TELUS experienced good operating results in 2001, has strong liquidity and maintains a healthy investment grade credit rating. The dividend reduction, in combination with the enhancement of the dividend reinvestment plan, reduces the outflow of cash from approximately $400 million annually to $100 million. So the reduced dividend enables TELUS to reinvest a greater proportion of cash flow from our traditional telecom (ILEC) operations into our fast-growing national data, IP and wireless businesses while maintaining a strong balance sheet. The possibility of a dividend reduction was disclosed in last year’s annual report and became widely expected by investors. The announcement of the dividend change provided desired clarity on the issue while the dividend yield remained attractive relative to industry norms. As a result, TELUS shares traded up on the announcement on October 25 of the reduction, in contrast to the typical result for firms who reduce a dividend for reasons of business failure and financial difficulty. |
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