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Is BCE Inc. or Telus Corporation the Better Buy Today?

BCE Inc. (TSX:BCE)(NYSE:BCE) and Telus Corporation (TSX:T)(NYSE:TU) are two of the three largest communications companies in Canada, and both of their stocks represent intriguing long-term investment opportunities today. However, the laws of diversification state that we cannot own both, so let’s take a closer look at the companies first-quarter earnings results, their stocks’ valuations, and their dividend yields to determine which is the better buy today.

BCE Inc.

BCE’s stock has risen about 1% year-to-date, and it has declined about 1% since it announced its first-quarter earnings results on the morning of April 30. Here’s a summary of six of the most notable statistics from its report compared with the year-ago period:

  1. Adjusted net income increased 12.6% to $705 million
  2. Adjusted earnings per share increased 3.7% to $0.84
  3. Operating revenues increased 2.8% to $5.24 billion
  4. Adjusted earnings before interest, taxes, depreciation, and amortization increased 3.6% to $2.09 billion
  5. Cash flow from operating activities increased 6.4% to $1.05 billion
  6. Free cash flow decreased 11.8% to $231 million

At today’s levels, BCE’s stock trades at 16.1 times its median earnings per share outlook of $3.33 for fiscal 2015 and 15.3 times analysts’ estimated earnings per share of $3.52 for fiscal 2016, both of which are inexpensive compared with the industry average price-to-earnings multiple of 17.2.

In addition, BCE pays a quarterly dividend of $0.65 per share, or $2.60 per share annually, giving it stock a 4.8% yield at current levels. It is also worth noting that the company has increased its dividend 11 times in the last six years, and its strong operational performance could allow for another increase in the second half of this year.

Telus Corporation

Telus’ stock has risen about 1% year-to-date, including an increase of just over 0.5% since it announced its first-quarter earnings results on the morning of May 7. Here’s a summary of six of the most notable statistics from its report compared with the year-ago period:

  1. Adjusted net income increased 11.5% to $427 million
  2. Adjusted earnings per share increased 12.9% to $0.70
  3. Operating revenues increased 4.6%% to $3.03 billion
  4. Adjusted earnings before interest, taxes, depreciation, and amortization increased 6.2% to $1.15 billion
  5. Cash provided by operating activities increased 20.1% to $718 million
  6. Free cash flow decreased 6.9% to $271 million

At current levels, Telus’ stock trades at 16.9 times its median earnings per share outlook of $2.50 for fiscal 2015 and 15.2 times analysts’ estimated earnings per share of $2.79 for fiscal 2016, both of which are inexpensive compared with the industry average price-to-earnings multiple of 17.2.

Additionally, Telus pays a quarterly dividend of $0.42 per share, or $1.68 per share annually, which gives its stock a 4% yield at today’s levels. Investors should also note that the company has increased its dividend nine times since announcing its multi-year dividend-growth program in May 2011, and it expects to increase it by another 10% annually through 2016.

Which stock is the better buy today?

After comparing the companies’ first-quarter earnings results, their stocks’ valuations, and their dividend yields, I think Telus represents the better long-term investment opportunity today. Both stocks trade at attractive forward valuations, have high dividend yields, and have consistently increased their annual dividend payments, but Telus reported slightly stronger first-quarter earnings results, giving it a very narrow win in this match-up. Long-term investors should take a closer look and strongly consider establishing positions today.

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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 Joseph Solitro has no position in any stocks mentioned.

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