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Better Long-Term Investment: Utilities vs. Telecoms

Both utilities and telecoms make for some of the best long-term investments available on the market. Both have very stable, regulated markets that continue to provide a service to the customers and communities that they serve, and both provide a very lucrative income that has grown significantly over the past year.

While there is a case to invest in both a utility and telecom, investors contemplating an investment in one or the other should consider what each offers.

Invest in a utility over a telecom

Utilities such as Fortis Inc. (TSX:FTS)(NYSE:FTS) are often noted as being incredible long-term investment options thanks in part due to their lucrative business models, which provide stable and secure streams of income.

Critics of the model often point to the fact that utilities lack true growth options because the attractive dividend leaves little room for reinvestment and growth. Where Fortis differs in this regard is through the company’s aggressive stance to expansion, which has seen Fortis take over smaller players in the market and expand into new markets and in complementary areas such as transmission lines.

Fortis now has operations across Canada, in a handful of U.S. states, as well as in several Caribbean countries, which makes the company a diversified pick in addition to being a great income stock.

In terms of a dividend, Fortis offers investors a quarterly dividend with a respectable yield of 4.03%. One of the most appealing aspects of Fortis for potential long-term investors is that Fortis has an established record of hiking its dividend annually for well over four decades.

If your preference is for a reliable income stock that has steady growth prospects, Fortis may be the perfect buy-and-forget candidate for your portfolio.

Invest in a telecom over a utility

BCE Inc. (TSX:BCE)(NYSE:BCE) is the largest telecom in the country, offering traditional telecom subscription internet, TV, wired, and wireless phone services to subscribers across the country. More recently, BCE entered the growing home security and monitoring market through its acquisition of AlarmForce last year.

In addition to its traditional subscription services, BCE also has an impressive media empire that offers an array of radio and TV stations, and it maintains ownership in professional sports teams.

In short, BCE is a massive company that blankets the Canadian market with each individual segment playing off and contributing to the success of the other. BCE’s moat is so impressive that most of us would be hard-pressed to go through a single day without listening to, watching, or receiving information from one of BCE’s assets.

Incredibly, that’s not the most impressive asset of BCE. For that honor, let’s take a look at BCE’s quarterly dividend.

BCE has been rewarding shareholders for well over a century, and the current yield stands at a very impressive 5.55%. BCE has consistently rewarded shareholders throughout the years, with annual or better hikes to the dividend that span back a decade; the most recent uptick came earlier this year.

BCE is a classic example of a buy-and-forget stock. While the stock is trading down over 8% year to date, long-term prospects remain strong, and investors considering a position in BCE should take advantage of the current discounted rate.

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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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