Which Is the Best Telecom to Add to Your Portfolio?

Both BCE Inc. (TSX:BCE)(NYSE:BCE) and Rogers Communications Inc. (TSX:RCI.B)(NYSE:RCI) offer compelling benefits to investors, but which one is the better investment?

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Both Rogers Communications Inc. (TSX:RCI.B)(NYSE:RCI) and BCE Inc. (TSX:BCE)(NYSE:BCE) provided quarterly updates over the past month, reaffirming their positions as great investment options.

But is there a better investment between these two telecom heavyweights? Let’s take a look at the case for both.

The case for BCE

BCE is the larger of the two companies, and in addition to the core TV, internet, phone, and wireless subscription services on offer, BCE has also amassed a significant media empire that includes radio and TV stations as well as real estate holdings and even professional sports teams.

BCE’s significant holdings that blanket our everyday lives is just one impressive area that BCE has built over the years, seamlessly becoming part of our everyday lives without even realizing it. Chances are, you’ve already listened to, viewed, or used the network of BCE already today.

BCE is often touted as a great buy-and-forget stock, owing to the fact that as BCE’s infrastructure is built out, the company passes on more earnings to shareholders in the form of an impressive quarterly dividend, which currently provides a healthy 4.67% yield.

In terms of results, BCE recently provided a quarterly update on the third fiscal of 2017. In that quarter, net earnings saw an improvement of 2.4% to come in at $817 million. On an adjusted basis, BCE reported earnings of $799 million, or $0.88 per share adjusted, still beating the same period last year by 1.9%.

The two figures that are of great impact to investors are the wireless subscriber growth and the average revenue per user (ARPU). The wireless sector is one of incredible growth, fueled by a nearly insatiable growth for more data.

In the most recent quarter, BCE’s wireless segment grew by 9.2% to just over 117,000. This growth, which was largely attributed to strong growth and subscribers added through the completed MTS deal, helped propel the blended ARPU for the quarter higher to $69.78.

BCE also announced another acquisition, which will see the behemoth enter the home security market, potentially exposing additional growth opportunities.

The case for Rogers

Rogers is the other heavyweight in the telecom market, offering a nearly complete replica of BCE’s offerings. The one area where Rogers lags behind at the moment is in the realm of offering an IPTV offering, as the company’s own proprietary services were wound down last year and a viable replacement is only set to enter final testing over the next quarter, with a roll-out sometime next year. Still, the solution to fill Rogers’s IPTV gap is a highly anticipated and successful service that is already used in the U.S. market.

Much like BCE, Rogers’s wireless growth is the focus of the company, and in the most recent quarter, Rogers shattered expectations by reporting the best growth numbers in nearly a decade. What’s impressive about this growth is that unlike BCE, which was largely acquisition-based growth, Rogers has been aggressively marketing its wireless packages, which led to this recent spike.

On a dividend front, Rogers offers investors a 2.82% yield, which, while respectable, lags behind that of BCE. While industry pundits speculate that Rogers will start hiking the dividend to be more competitive next year, Rogers compensates for the lower yield on the growth side of the equation. Year to date, the stock has shot upwards over 30%, and given the recent bout of results from the company, that growth is set to continue for the foreseeable time.

In the most recent quarter, Rogers reported total revenue of $3,581 million, representing an increase of 3% over the same quarter last year. On an adjusted basis, the company earned $523 million, bettering the figure from the same period last year by 22%. On a per-share basis, Rogers earned $1.02 per adjusted basic share, coming in 23% higher than the $0.83 per adjusted basic share in the same quarter last year.

Which is the better investment?

Both Rogers and BCE offer great investment options, but, in my opinion, Rogers is the better of the two investments now. The incredible growth has seen the stock surge in this year, and additional growth and a hike of the company’s dividend seem likely over the next few quarters.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Demetris Afxentiou has no position in any stocks mentioned.  

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