Dividend Investors: Should You Buy Fortis Inc. or BCE Inc.?

Fortis Inc. (TSX:FTS) and BCE Inc. (TSX:BCE)(NYSE:BCE) are two of Canada’s top dividend stocks.

Let’s see if one is a better pick right now.


Fortis is a natural gas distribution and electricity generation company with assets located in Canada, the United States, and the Caribbean.

The business has grown significantly over the years, and the strategy of adding assets through acquisitions and organic development continues today.

Fortis is spending US$11.3 billion to buy ITC Holdings Corp., the largest independent pure-play transmission company in the United States. This come on the heels of the 2014 purchase of UNS Energy for US$4.5 billion and last year’s expansion of the Waneta hydroelectric operations in British Columbia.

The results have been impressive. Fortis delivered record net income in 2015 of $2.11 per share, and investors have enjoyed more than 40 consecutive years of dividend growth.

The payout currently offers a yield of 3.6%, and management says investors should see the distribution increase at least 6% per year through 2020.


BCE has changed a lot in the past few years, but the stock remains a top pick for dividend investors.

The shift into the media space initially raised some eyebrows among BCE’s long-time investors, but management has its finger on the pulse of the market and the decision appears to be timely.

BCE now owns sports teams, a television network, specialty channels, radio stations, retail stores, and an advertising business.

When you combine these assets with the world-class wireless and wireline network infrastructure, you get a powerful business that touches the live of most Canadians on a weekly, if not daily, basis.

The company continues to expand its reach with the recently announced plan to acquire Manitoba Telecom Services for $3.9 billion. Some market watchers are skeptical the deal will be approved by regulators, but BCE has put an agreement in place to sell part of the wireless business to Telus in an effort to head off competition concerns.

The company will also invest $1 billion over the next five years to upgrade the MTS network, and Manitobans could see Internet speeds up to 20 times faster than their current services within a year of the closing of the deal.

A few adjustments to the takeover might be required, but I think the deal will go through. Very few companies have the means to invest the money needed to get the province’s infrastructure up to speed.

BCE is spending billions to stay ahead of the competition, but it still generates enough free cash flow to boost the dividend every year. The current quarterly payout offers a yield of 4.5%.

Which should you buy?

Both stocks are great buy-and-hold picks. If you only have the cash to buy one, I would go with BCE for the higher yield.

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Fool contributor Andrew Walker has no position in any stocks mentioned.

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