Pensioners: Should You Buy TransCanada Corporation or Telus Corporation Today?

Income investors are searching for reliable dividend-growth stocks to put in their TFSA income portfolios.

The strategy is popular among retirees who are looking to generate tax-free income from the money they are forced to withdraw from tax-deferred retirement accounts.

Let’s take a look at TransCanada Corporation (TSX:TRP)(NYSE:TRP) and Telus Corporation (TSX:T)(NYSE:TU) to see if they are attractive picks today.


TransCanada spent US$13 billion last year to buy Columbia Pipeline Group in a move that added strategic assets in the growing Marcellus and Utica gas plays.

The deal also gave TransCanada attractive additional pipeline infrastructure, including a network that runs from Appalachia to the Gulf Coast.

The company now has about $23 billion in near-term development projects on the go that should provide enough cash flow growth to support annual dividend hikes of at least 8% through 2020.

TransCanada’s Energy East pipeline project in Canada is back to square one, but the Keystone XL pipeline could actually get built.

At the moment, the stock price might not fully reflect the potential benefits once Keystone goes into service.

TransCanada’s current dividend provides a yield of 4%.


Telus is one of Canada’s top communication companies.

Some pundits say the company’s decision to avoid spending billions on media assets puts it at a disadvantage to its peers.

Time will tell if that theory is true, but for the moment, Telus appears to be doing just fine.

The company continues to add new TV, mobile, and internet customers at an impressive rate and recently picked up a big batch of wireless subscribers in Manitoba as part of the BCE takeover of Manitoba Telecom Services.

In addition, Telus is investing in other segments, including healthcare. In fact, Telus Health is already a leading provider of digital health services to Canadian doctors, hospitals, and insurance companies.

The company has a strong track record of dividend growth and has traditionally rewarded shareholders through aggressive stock buybacks.

The current dividend provides a yield of 4.4%.

Is one more attractive?

Telus tends to be less volatile and offers the better yield today. If you want a more conservative pick, go with the communications provider.

TransCanada gives nice exposure to the United States and could provide better dividend growth over the medium term, especially if one of the mega-projects gets built.

If you think the energy sector is bottoming out, TransCanada might be a more attractive choice right now.

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

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