BCE vs. Telus: Which Stock Should You Buy?

If you’re looking for large, reliable dividends, look no further.

| More on:
The Motley Fool

If you’re looking for strong, predictable earnings and reliable dividends, look no further than Canada’s big three telecommunications providers. With subscription-based revenue and limited competition, these companies are able to generate very consistent cash flow, something that all dividend investors should be looking for.

On that note, below we take a look at two of the big three, in an attempt to determine which one is more worth buying.

BCE

With a market capitalization of nearly $40 billion, BCE (TSX: BCE)(NYSE: BCE) is easily Canada’s largest telecommunications company. It’s also been on a very nice run, with the shares gaining in value every year since 2009 — over the past five years, its shares have returned nearly 20% per year.

The company is facing plenty of headwinds, just like its peers are. The Canadian government is trying to bring greater competition to the wireless market, and introducing stricter regulations in the meantime. The emergence of streaming services threatens BCE’s TV and media divisions, which together account for nearly a quarter of revenue. Also, costs for things like wireless spectrum and NHL broadcasting rights have skyrocketed.

However, BCE is still able to keep producing consistent earnings, most of which get paid out in dividends. The company is not particularly expensive either, trading at 15 times forward earnings. As a result, the shares yield over 5%.

Telus

The last five years have been even better for shareholders of Telus (TSX: T)(NYSE: TU) — over this stretch, the company’s shares have returned over 25% per year.

This has been no fluke; Telus has been outperforming its peers by a wide margin. For example, in the most recent quarter, Telus added 48,000 net new wireless subscribers, easily beating its two rivals. It’s also doing a fantastic job keeping these subscribers satisfied; in a typical month, less than 1% of wireless subscribers cancel their service.

This is all showing up in the company’s financial results. Last year both revenue and EBITDA increased by more than 4%. Thanks to some strong share buyback activity, earnings per share increased more than 9%. Telus has thus been able to bump up its payout; dividends declared per share increased more than 11% in 2013, and have been raised again this year.

Remarkably, Telus still only trades at 15 times forward earnings, just like BCE. As a result, the shares yield a healthy 3.8%.

So which stock should you buy? Well, if you’re looking to hit a home run, probably neither. But if you’re looking for good, safe dividends, then you should probably add both to your portfolio.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Benjamin Sinclair holds no positions in any of the stocks mentioned in this article.

More on Investing

Senior housing
Retirement

3 Lesser-Known Reasons to Invest in an RRSP

The RRSP has so many more benefits that investors might be unaware of, and can be used for your benefit…

Read more »

IMAGE OF A NOTEBOOK WITH TFSA WRITTEN ON IT
Retirement

TFSA Blueprint: 4 Canadian Stocks to Secure Your Future

Successful TFSA investing requires four steps and four Canadian stocks to secure your future.

Read more »

gas station, car, and 24-hour store
Energy Stocks

Is it Too Late to Buy Suncor Stock?

Suncor Energy stock has rallied big in the last year, but expect it to move higher as efficiencies keep rolling…

Read more »

Payday ringed on a calendar
Dividend Stocks

TFSA Monthly Money: How to Generate Consistent Tax-Free Passive Income

Adding these two attractive Canadian dividend stocks to your TFSA now could help you earn reliable monthly passive income for…

Read more »

analyze data
Dividend Stocks

3 Magnificent TSX Dividend Stocks to Buy and Hold Forever

Do you want to hold some quality dividend stocks for the decades ahead? Here are three stocks worth holding for…

Read more »

Double exposure of a businessman and stairs - Business Success Concept
Tech Stocks

Up 51% This Year: This Canadian AI Stock is Still Down 65% From Its Highs – Time to Buy?

Copperleaf Technologies (TSX:CLPF) stock has shown positive momentum as the AI stock attempts a recovery. Can shares rise 180% to…

Read more »

Oil pipes in an oil field
Energy Stocks

TSX Energy Sector: Best Stocks to Buy in May 2024

Energy stocks like Suncor are generating massive amounts of cash flows and paying out significant dividends.

Read more »

HIGH VOLTAGE ELECRICITY TOWERS
Dividend Stocks

How Much Will Canadian Utilities Pay in Dividends This Year?

Investors can stabilize their long-term stock portfolio returns by accumulating quality utility stocks on meaningful dips.

Read more »