BCE Inc. or Royal Bank of Canada: Which Stock Is Best for Your Retirement Portfolio?

Canadian investors continue to seek out top-quality companies to hold inside their TFSA or RRSP portfolios.

Let’s take a look at BCE Inc. (TSX:BCE)(NYSE:BCE) and Royal Bank of Canada (TSX:RY)(NYSE:RY) to see if one is an interesting pick.


BCE closed its purchase of Manitoba Telecom Services earlier this year in a deal that moved the communications giant into the top spot in the Manitoban market, and set it up for a potential expansion of its presence in western Canada.

In addition to the wireline and wireless assets, BCE also has a media division, which includes sports teams, a television network, specialty programs, and radio stations.

When all the parts of the puzzle come together, you get a powerful business with the capability of interacting with most Canadians on a weekly, if not daily, basis.

Some investors are concerned rising interest rates will hit the telecom stocks hard. Higher rates certainly close the gap between dividend yield and GIC returns, but we are a long way from seeing GICs match BCE’s 4.9% yield.

The company generates significant free cash flow to support the dividend, and while growth is slow, the stock remains an attractive buy-and-hold pick for people who don’t want to watch their computer screens every day to see what’s happening in the markets.

Royal Bank

Royal Bank recently reported fiscal Q3 2017 earnings of $2.8 billion. That’s right; Royal Bank generates profits of more than $900 million per month!

A big part of the company’s success lies in its balanced revenue stream. Royal Bank has strong personal and commercial banking, wealth management, and capital markets divisions.

The company has also invested in a U.S. expansion in recent years with the 2015 purchase of California-based private and commercial bank, City National.

Some people think the banks might be hit hard by a downturn in the Canadian housing sector. A total meltdown would have an impact, but the likely scenario is a gradual pullback in house prices, and Royal Bank is more than capable of riding out a rough patch.

The stock is down about 7% in the past six months, so investors can now pick up a dividend yield of about 4%.

Is one more attractive?

Both companies are market leaders with strong track records of dividend growth.

At this point, I would probably split a new TFSA or RRSP investment between the two giants.

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Fool contributor Andrew Walker owns shares of BCE.

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