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Dividend Investors: Should You Buy TransCanada Corporation or Telus Corporation?

TransCanada Corporation (TSX:TRP)(NYSE:TRP) and Telus Corporation (TSX:T)(NYSE:TU) are popular picks among Canadian investors.

Let’s take a look at the two companies to see if one deserves to be in your portfolio today.


TransCanada took a hit last year when President Obama rejected the company’s Keystone XL pipeline, but the stock has bounced back with a vengeance in 2016.

What’s up?

TransCanada decided to beef up its presence in the North American natural gas infrastructure space and bought Columbia Pipeline Group for US$13 billion.

The deal provides TransCanada with strategic assets located in the growing Marcellus and Utica shale plays, along with additional pipeline networks, including a key line that runs from Appalachia to the Gulf Coast.

The addition of Columbia also boosts TransCanada’s near-term development portfolio to $25 billion. As these assets go into service, the company expects cash flow to increase enough to support annual dividend hikes of at least 8% through 2020.

In order to pay for the Columbia acquisition, TransCanada recently signed a deal to sell US$3.7 billion in power assets and found buyers for $3.2 billion in new stock.

The share price initially dipped on news of the equity issue, but it’s starting to climb again.

Keystone and the company’s other major project, Energy East, remain stuck in the mud, and investors should view them as bonuses when evaluating the company.

TransCanada’s dividend currently yields 3.9%.


Telus continues to add new wireless, TV, and internet subscribers at a strong rate and is investing heavily to expand its state-of-the art network infrastructure.

The company is also committed to delivering the industry’s best level of customer service. That strategy appears to be paying off as postpaid mobile churn remains below 1% and blended average revenue per user (ARPU) continues to grow.

One other area to watch is Telus Health. The division is already Canada’s leading provider of digital solutions to doctors, hospitals, and insurance companies and could become a significant contributor to earnings in the coming decade.

Telus just raised its dividend for the 12th time in the past six years. The current quarterly distribution of $0.48 per share yields 4.5%.

Which is a better bet?

Both stocks are strong dividend-growth picks and deserve to be in any income portfolio.

Earlier in the year I would have chosen TransCanada ahead of Telus, but the pipeline stock has rallied to the point where the advantage has been wiped out. As such, I would probably go with Telus today for the higher yield.

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

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