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

Should you be a long-term buyer of BCE Inc. (TSX:BCE)(NYSE:BCE) or Telus Corporation (TSX:T)(NYSE:TU) today?

| More on:
The Motley Fool

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 very attractive long-term investment opportunities today.

However, in order to stay diversified, we must only choose one for our portfolios, so let’s take a closer look at each company’s earnings results in the first nine months of fiscal 2015, their stocks’ valuations, and their dividends to determine which is the better buy today.

BCE Inc.

BCE’s stock has risen over 4.5% year-to-date, including a decline of about 1% since it released its earnings results on the morning of November 5 for its three- and nine-month periods ended on September 30, 2015. Here’s a summary of eight of the most notable statistics from the first nine months of fiscal 2015 compared with the same period in fiscal 2014:

  1. Adjusted net earnings increased 16.5% to $2.23 billion
  2. Adjusted earnings per share increased 7.3% to $2.64
  3. Operating revenues increased 2.6% to $15.91 billion
  4. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) increased 3.1% to $6.48 billion
  5. Adjusted EBITDA margin improved 20 basis points to 40.7%
  6. Cash from operating activities increased 18.8% to $4.9 billion
  7. Free cash flow increased 9% to $2.08 billion
  8. Total wireless subscribers increased 1.8% to 8.18 million

At today’s levels, BCE’s stock trades at 16.4 times fiscal 2015’s estimated earnings per share of $3.41 and 15.6 times fiscal 2016’s estimated earnings per share of $3.57, both of which are inexpensive compared with the industry average price-to-earnings multiple of 21.1 and the latter of which is inexpensive compared with its five-year average multiple of 16.

In addition, BCE pays a quarterly dividend of $0.65 per share, or $2.60 per share annually, giving it stock a 4.7% yield. Investors must also note that the company has raised its annual dividend payment for seven consecutive years.

Telus Corporation

Telus’s stock has fallen over 2.5% year-to-date, including a decline of over 6.5% since it released its earnings results on the morning of November 5 for its three- and nine-month periods ended on September 30, 2015. Here’s a summary of eight of the most notable statistics from the first nine months of fiscal 2015 compared with the same period in fiscal 2014:

  1. Adjusted net income increased 6.3% to $1.23 billion
  2. Adjusted earnings per share increased 8% to $2.03
  3. Operating revenues increased 4.6% to $9.29 billion
  4. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) increased 4.5% to $3.41 billion
  5. Adjusted EBITDA margin contracted 10 basis points to 36.7%
  6. Cash provided by operating activities increased 7.6% to $2.68 billion
  7. Free cash flow increased 22.4% to $881 million
  8. Total wireless subscribers increased 2.8% to 8.42 million

At today’s levels, Telus’s stock trades at 16.8 times fiscal 2015’s estimated earnings per share of $2.42 and 14.9 times fiscal 2016’s estimated earnings per share of $2.73, both of which are inexpensive compared with its five-year average price-to-earnings multiple of 17.2 and the industry average multiple of 21.1.

In addition, Telus pays a quarterly dividend of $0.44 per share, or $1.76 per share annually, giving its stock a 4.3% yield. It is also important for investors to note that the company has raised its annual dividend payment for 12 consecutive years.

Which stock is the better buy today?

Here’s how each company ranks when comparing the strength of their earnings results in the first nine months of fiscal 2015, their stocks’ valuations compared with their five-year and industry averages, their dividend yields, and their dividend-growth history: 

Metric BCE Telus
Earnings Strength 2 1
Forward Valuations 2 1
Dividend Yield 1 2
Dividend Growth 2 1
Average Ranking 1.75 1.25

As the chart above shows, BCE has a higher dividend yield, but Telus reported stronger earnings results in the first nine months of fiscal 2015, its stock trades at more attractive forward valuations, and it has a longer streak of annual dividend increases, giving it the easy win in this match up. With all of this being said, both stocks represent great long-term investment opportunities today, so Foolish investors should strongly consider initiating positions in one of them in the trading sessions ahead.

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.

More on Dividend Stocks

Two seniors float in a pool.
Dividend Stocks

TFSA: How to Earn $1,890 in Annual Tax-Free Income

Plunk these investments into your TFSA to earn passive income and avoid the taxman.

Read more »

Engineers walk through a facility.
Dividend Stocks

1 TSX Stock I Wouldn’t Touch With a 10-Foot Pole

AtkinsRéalis (TSX:ATRL) is one TSX stock I'd never invest in.

Read more »

edit Woman in skates works on laptop
Dividend Stocks

3 No-Brainer Stocks to Buy Under $30

These three stocks all offer a huge deal for investors looking for dividends, as well as growth that will last.

Read more »

You Should Know This
Dividend Stocks

How to Convert a $300 Monthly Investment Into $338 in Monthly Income

If you want a certain amount in monthly passive income, invest a similar amount today and leave the rest to…

Read more »

Increasing yield
Dividend Stocks

3 Income Stocks With Big Yields to Consider in April 2024

If you haven’t yet made your March investments, here are three income stocks to buy the dip and lock in…

Read more »

Senior Man Sitting On Sofa At Home With Pet Labrador Dog
Dividend Stocks

RRSP Investors: Don’t Miss Out on This Contribution Hack!

This hack has so many benefits for you -- not just when you put it in your RRSP but for…

Read more »

A red umbrella stands higher than a crowd of black umbrellas.
Dividend Stocks

Passive Income: 2 Safe Dividend Stocks to Own for the Next 10 Years

Dividend stocks such as Manulife and Fortis can help you generate a stable and recurring passive-income stream.

Read more »

Young woman sat at laptop by a window
Dividend Stocks

3 Dividend Stocks Everyone Should Own for the Long Haul

For investors looking for top-tier dividend stocks to buy and hold for the long term, here are three of my…

Read more »