BCE Inc. vs. Rogers Communications Inc.: Which Should You Buy?

Both Rogers Communications Inc. (TSX:RCI.B)(NYSE:RCI) and BCE Inc. (TSX:BCE)(NYSE:BCE) seem like great dividend stocks. But which one is better?

| More on:
The Motley Fool

If you’re looking for safe dividend stocks, Canada’s big three telecommunications providers are a great place to start. They make recurring revenue, face little competition, and are protected by high barriers to entry.

The two largest players, Rogers Communications Inc. (TSX: RCI.B)(NYSE: RCI) and BCE Inc. (TSX: BCE)(NYSE: BCE) offer a perfect illustration.

But which one is more appropriate for your portfolio? Below we take a closer look.

Rogers Communications Inc.

It has not been a strong year for shareholders of Rogers. Over the past 12 months, its shares are only up 3% – even after factoring in dividends, the stock has been a laggard. The company has a reputation for poor customer service, which seems to have played a factor over the past few quarters.

But there are reasons to be optimistic. For one, Rogers seems to have the right priorities with new CEO Guy Laurence. He has made improving customer service a top priority, even shuffling the corporate structure as part of his efforts.

Secondly, Rogers has made some big investments recently to bolster its asset base. For example, the company emerged as the big winner in the Canadian government’s most recent spectrum auction. Rogers also won exclusive rights to broadcast NHL games in Canada, beating BCE in a bidding war. Both of these came at a heavy price, but should also pay big dividends over the long run.

Finally, Rogers is trading at a discount to its peers, at only 14.8 times earnings (by comparison, BCE trades at 18.9 times earnings). As a result, the dividend yield stands at a healthy 4.3%. This is a fantastic yield for such a stable company. And if Mr. Laurence is able to execute on his plans, the shares might get you some capital gains income as well.

BCE Inc.

BCE enjoys a lot of the same advantages that Rogers does, but as mentioned, trades at a higher multiple. So what’s to like about this company?

For one, BCE’s revenue mix has improved dramatically. The company once best known for traditional telephone service has been slowly diversifying away from that space – last year traditional home phone service accounted for just 8% of revenues.

BCE also may have a more favourable revenue mix than Rogers, due to its lower emphasis on television subscriptions. Last year, TV subscriptions accounted for only 11% of BCE’s revenue, compared to 27% for Rogers. This is an industry that is coming under extreme pressure as consumers, especially younger ones, ‘cut the cord’.

Furthermore, Bell isn’t exactly at a media disadvantage compared to Rogers. It’s true that Rogers scored a big win with the NHL rights, but BCE still has plenty of media assets (such as television channels) after the Astral acquisition. This includes a leadership position in sports, which is seen as a primary defence against cord cutting. In fact BCE is expanding its TSN franchise from two channels to five, demonstrating just how much content it has to offer.

Finally, BCE is not overly expensive either, and as a result has a dividend yielding north of 5%, even higher than Rogers’ dividend.

So while you should probably buy Rogers before BCE, both companies are great candidates for any dividend 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 has no position in any stocks mentioned.

More on Investing

money cash dividends
Dividend Stocks

The 2 Stocks Every Dividend Investor Should Own for Reliable Cash

Dividend stocks offering consistent and reliable returns can be a crucial asset in any portfolio, especially for income-producing dividend portfolios.

Read more »

grow dividends
Dividend Stocks

2 Dividend Stocks to Double Up on Right Now

These top TSX dividend-growth stocks now offer yields above 7%.

Read more »

Dollar symbol and Canadian flag on keyboard
Dividend Stocks

TFSA: 2 Canadian Stocks to Buy and Hold for Tax-Free Gains

Building a large, tax-free nest egg in your TFSA with growth stocks can give you more control over your tax…

Read more »

Group of people network together with connected devices
Tech Stocks

This Is the Best Overlooked AI Stock on the TSX Today

This AI stock has been a top growing in the last while, but remains overlooked despite its strong portfolio and…

Read more »

Women's fashion boutique Aritzia is a top stock to buy in September 2022.
Dividend Stocks

May Boycotts: Is Loblaw Stock in Trouble?

Even extreme fluctuations in consumer purchasing patterns may not impact a stock as aggressively as demoralizing actions like boycotts.

Read more »

Dice engraved with the words buy and sell
Stocks for Beginners

TD Stock: Buy, Sell, or Hold?

TD stock (TSX:TD) is under immense scrutiny during its money laundering probe, but this could also mean it is a…

Read more »

Different industries to invest in
Tech Stocks

Why This AI Stock Surged 363% in Just 1 Year

This AI stock has surged this year by almost 400%! And yet this could only be the beginning for this…

Read more »

Online shopping
Tech Stocks

2 Growth Stocks Bay Street Might Be Sleeping On, but I’m Not

I'm not sleeping on Taiwan Semiconductor (NYSE:TSM) stock. Shopify (TSX:SHOP) is a Canadian stock with similar growth rates.

Read more »