BCE Inc. (TSX:BCE)(NYSE:BCE) and Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) are two of Canada’s top companies.
Let’s see if one is a better pick right now for your TFSA.
BCE
BCE continues to chug higher as investors seek out safety with better-than-average yield.
Financial unrest is hitting the global market again, but BCE is relatively protected from all the noise. In fact, the company’s media assets probably benefit from higher viewership as people tune in to the radio, watch the news, or catch up on interviews with leading investment personalities.
BCE continues to expand its dominance in the Canadian market through network investments and regional acquisitions with the latest deal being a $3.9 billion bid to buy Manitoba Telecom Services.
Some analysts say the stock is overpriced. That is a valid point when comparing the current multiple to historical trends, but interest rates are extremely low and probably not going higher in the medium turn.
As a result, the reset on what people are willing to pay for stable utility and telecom stocks is probably going to stick around for a while.
BCE pays a quarterly dividend of $0.6825 per share. At today’s stock price you get a solid 4.5% yield on your investment.
Bank of Nova Scotia
Canada’s most international bank was trading at a fire-sale price back in January, and while the big rally since then has wiped out the crazy discount, the stock still looks attractive.
Why?
The Canadian banks are facing some headwinds in the home market, and that means they have to look for opportunities in other areas to drive future growth. Bank of Nova Scotia is betting big on Latin America.
The company’s main focus is on Columbia, Mexico, Chile, and Peru. These four countries make up the core of the Pacific Alliance, a trading bloc set up to enable the free movement of goods and capital.
Penetration of banking services is much lower in this region than it is in Canada and the 200 million potential customers pose an attractive market. Economic development is helping expand the middle class, and that bodes well for demand for credit cards, loans, car loans, and investment products.
By having a strong presence in each of the member countries, Bank of Nova Scotia is also well positioned to benefit from increased trade, as companies require a wide variety of cash management products and services when entering new markets.
Bank of Nova Scotia pays a quarterly dividend of $0.72 per share for a yield of 4.5%.
Which should you buy?
Both stocks are solid long-term holdings and deserve to be in any TFSA portfolio. At the moment the two companies offer the same yield, and dividend growth is likely to be similar over the next few years.
If you only have the cash to buy one, I would probably go with BCE as a first pick given the near-term volatility in the global financial markets.
