As the risk of interest rate increases subsides, dividend stocks like Telus (TSX:T)(NYSE:TU) have rebounded, as they look well set up to continue to provide investors with strong dividend income and roll out the newest technologies for their telecom customers.
BCE’s stock price has rallied 10% so far in 2019, as the stock has more than come back from 2018 weakness when interest rates were expected to be rising.
Currently giving investors a dividend yield of 5.34%, and with a 117% increase in dividends in the last 10 years (the most recent 5% dividend increase was in the fourth quarter of 2018), BCE is proving to be an investor’s dream. Although the stock price has recovered from a weak 2018, this dream stock is looking more and more attractive on a fundamental basis.
With free cash flow of more than $3.6 billion in 2018 (+4.4% versus 2017), and free cash flow as a percentage of revenue of 15%, BCE is a pillar of strength and well positioned to continue to invest in the business.
Importantly, BCE continues to make good traction in the wireless fight, with postpaid net additions of 122,000 coming in better than Rogers’s additions of 112,000. This follows a strong 2017 wireless performance.
Furthermore, BCE is spending billions to invest in its fibre-optic networks, as this is the future of the telecommunications industry.
Going forward, we can expect a low to mid-single-digit annual dividend increases for BCE, which will be supported by the company’s ample cash flow.
Telus is Canada’s second-largest telecommunications provider that provides wireline, data and wireless service, and provides investors with stability, predictability, and dividend income.
This telecommunications company has recently reported better-than-expected results, is trading at 52-week highs, and has a dividend yield of 4.39%.
Telus has a long history of semi-annual dividend increases, with a seven-year compound annual growth rate (CAGR) of 11.4%.
It has been one of the faster-growing telecom companies, and although this growth is off a smaller base, this faster growth has made Telus a success story.
Telus is involved in different projects that will help in the long-term growth trajectory of the company.
The Telus Health Electronic Medical Record (EMR) solution has invested $2 billion in the Canadian healthcare system in the last five years and has a dedicated team to manage all tech and data needs.
Also, Telus International and the fact that Telus has industry-leading 5G coverage of 70% contribute to a strong future.
There is no doubt that both Telus and BCE provide investors with healthy and reliable dividend growth, as they get exposure to the massive opportunity that is the telecom industry.
While BCE is still the more stable choice between the two, with a proven track record of execution and cost efficiencies, Telus is also a solid choice for long-term dividend growth.
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 Karen Thomas has no position in any of the stocks mentioned.