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Is BCE Inc. (TSX:BCE) or Fortis Inc. (TSX:FTS) a Buy for Your TFSA Income Fund?

BCE (TSX:BCE)(NYSE:BCE) and Fortis (TSX:FTS)(NYSE:FTS) are two of the most popular defensive dividend stocks on the TSX index. Both names are trumpeted in the Canadian mainstream financial media, and although many young investors are sick of hearing of both companies, it’s important to remember that over the long term, defence wins championships.

As volatility prevails, you’re going to need some reliability in your portfolio. And that’s where the two defensive kings come into play. But which Dividend Aristocrat is a better fit for your TFSA at this juncture? Let’s have a closer look at each name and how they stack up.

BCE

The dividend darling that’s fallen from glory has started to pick up traction again, with shares jumping 13% since the Christmas Eve crash.

BCE is a Steady Eddie dividend play that’ll reward investors through thick and thin, but in terms of the environment that’s up ahead, I’m not a fan of the telecom behemoth.

First, the Canadian telecom triopoly is getting disrupted by a fourth major entrant that’ll likely make a tonne of noise as 5G infrastructure is rolled out. While all the telecoms are going to be spending money (in a rising-rate environment), the way I see it, BCE has the most to lose. It’s got a massive subscriber base, many lower-ROE legacy assets (wireline and media), and, worst of all, it’s an aircraft-carrier-sized player in an arena that I believe will favour agility.

With that, I expect flat to low single-digit top-line growth (potentially a contraction in three years out?), and with a 16.1 forward P/E, which I’d consider fair, I think BCE is an easy pass.

Fortis

Here’s a utility that’s the epitome of stability.

While nearly every investor has heard of Fortis, many investors appear to be quick to discount the actual magnitude of long-term growth that the company is capable of. Sure, 5% in dividend hikes may seem underwhelming, but when you consider these raises are nearly guaranteed (or at least the closest thing to a guarantee you’ll find in the equity world), the Fortis story becomes that much more valuable.

When you consider the potential downside that could be on the horizon (the yield curve inversion could happen in late 2019 or early 2020, implying a recession in 2021), Fortis is an extremely prudent bet and one that won’t cost you an arm and a leg, which I find the most compelling part about the stock today.

The stock trades at 17.8 times forward earnings, with a 1.4 P/B, both of which are slightly lower than the historical averages. The dividend yield is modest at 3.8% versus BCE’s 5.6%, but from a total return perspective (accounting for both dividends and capital gains), I see Fortis as the better bet, regardless of what happens to the economy. Of course, if we fall into recession, Fortis will blow BCE right out of the water!

Stay hungry. Stay Foolish.

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Fool contributor Joey Frenette owns shares of FORTIS INC.

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