TFSA Investors: Should BCE Inc. or TransCanada Corporation Be in Your Portfolio?

Canadians are searching for quality stocks to put in their Tax-Free Savings Accounts (TFSAs).

Let’s take a look at BCE Inc. (TSX:BCE)(NYSE:BCE) and TransCanada Corporation (TSX:TRP)(NYSE:TRP) to see if one is attractive today.


BCE continues to solidify its dominant position in the Canadian communications market.

The company recently closed its $3.9 billion acquisition of Manitoba Telecom Services in a deal that bumps BCE to the top position in the Manitoba market.

The company plans to spend $1 billion to deliver advanced broadband networks across the province and now has a strong base in central Canada that it can use to expand its presence in the western provinces.

In addition to the company’s world-class wireless and wireline network assets, BCE also has extensive media businesses that include a TV network, specialty channels, radio stations, online portals, sports teams, and retail outlets.

As a result, any time a Canadian makes a phone call, sends a text, streams a movie, downloads a song, listens to the news, or checks e-mail, the odds are pretty good that BCE is involved somewhere along the line.

That’s a powerful business.

The stock pulled back from August last year to mid-March 2017 on concerns over rising interest rates, but it has picked up a bit of a tailwind since then, as it appears the sell-off might have been a bit overdone.

BCE generates solid free cash flow and provides a rock-solid dividend. The current yield is about 4.7%.


TransCanada took a hit in 2015 amid falling oil prices and President Obama’s rejection of the Keystone XL pipeline.

Investors who jumped in at the bottom are sitting on some nice gains, and more upside could be on the way.


TransCanada bought Columbia Pipeline Group in 2016 for $13 billion. The deal added significant natural gas assets and infrastructure and topped up TransCanada’s development portfolio.

The company currently has $23 billion in near-term projects on the go that should boost cash flow enough to support dividend growth of at least 8% per year through 2020.

In addition, Keystone is back in play under the Trump administration.

TransCanada has a strong track record of dividend growth, so investors should feel comfortable with the guidance.

The distribution yields 3.9%.

Is one a better TFSA bet?

Both stocks are strong buy-and-hold picks.

BCE provides the higher yield and tends to hold up a bit better when markets hit a speed bump. TransCanada probably offers better dividend growth in the medium term, and investors could see the stock move higher if one of the mega projects gets completed.

If you have the cash available, it might be worthwhile to add a bit of both to the TFSA portfolio.

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

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