questions
& answers
Will TELUS consider directing more of its cash flow toward dividend increases rather than share buybacks?
TELUS has a strong track record of returning capital to investors and has been paying dividends since 1916. In order to provide investors with more clarity on the outlook for our dividend, TELUS has had, since 2004, a Board-approved dividend payout guideline range of 45 to 55% of sustainable net earnings.
While there is no current intention to change the existing financial policy target on the dividend, TELUS' financial policies are periodically reviewed and approved by our Board of Directors. Income tax rates and any changes to federal and provincial taxation are factors that are taken into account in the dividend setting process. The actual and proposed changes to significantly reduce taxes on dividends for Canadians in 2006 and 2007 could, theoretically, be a factor in directing more cash toward dividends than share buybacks, especially for income-oriented investors. However, TELUS also has many growth-oriented investors who prefer capital appreciation to dividend increases. As demonstrated by our past practice, any changes to our dividend policies would reflect a balanced approach to debt and equity holders.
TELUS' goal is significant dividend growth on a sustained basis, and we continue to have a positive outlook reflecting continued growth in earnings. For instance, we announced a 36% increase in the quarterly dividend to 37.5 cents per share, effective January 1, 2007, which is the third sizeable increase in the past three years. The resulting annualized dividend of $1.50 is now the highest in the Company's history.
We also have an active share buyback program in place under which we have purchased, on a cumulative basis, 39.4 million shares for a total of $1.77 billion from December 2004 to the end of 2006. This includes approximately 16.5 million shares repurchased for $800 million in 2006. TELUS believes that such repurchases constitute an attractive investment opportunity and a desirable use of Company funds that should enhance the value of the remaining shares.
Notably, with both the increased dividend and continued share repurchases in 2007, TELUS would be distributing most of its free cash flow, after capital expenditures, to its shareholders.
Robert McFarlane
Executive Vice-President
and Chief Financial Officer
Member of the TELUS Team