Dreams of a luxurious, worry-free retirement are some of the most exciting dreams; we let our hearts and souls run free with wishes for the future, wishes for a time when we can focus on ourselves, and wishes for a time when we can maybe focus more on helping others.
To make these dreams a reality, we, of course, need the financial resources to back us up. And these days, we have many good opportunities to make this happen. So, I recommend fully utilizing your TFSA and your RRSP to squeeze as much as possible out of your savings. And if you can’t max out on the room afforded you with these accounts, don’t worry; just do as much as you can as soon as you can.
Also, and just as important, is to choose the right investments for your TFSA and RRSP accounts. Choose stocks that have stable and growing dividends and cash flows, solid balance sheets, and ample opportunities for growth.
Without further ado, here are two high-yield telecom stocks that offer investors exposure to a very lucrative industry that is highly profitable and highly visible.
As the market leader in internet and TV, and one of the largest wireless operators in Canada, BCE (TSX:BCE)(NYSE:BCE) is Canada’s largest telecommunications company. It has a history of strong dividend increases and stability.
In the last 10 years, BCE has increased its dividend by 117% to the current $3.17 per share. The latest increase was a 5% increase in the first quarter, and the current dividend yield for BCE stock is a generous 5.3%. Where else can you get that kind of a yield from such a low-risk, predictable, high-visibility company like BCE? There aren’t very many places.
We have to look no further than this telecom giant’s continuous raking in of cash as well as its solid execution and operational excellence. 2018 cash flow was $3.6 billion and free cash flow as a percentage of revenue was 15%.
BCE stock is down 4% since the beginning of this month, and while it is up 11% so far in 2019, I see this weakness as an opportunity to add this telecom giant, which is a pillar of strength and is drowning in cash at this time.
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As Canada’s second-largest telecommunications provider that provides wireline, data, and wireless services, Telus (TSX:T)(NYSE:TU) has been one of the fastest-growing telecom companies around, giving BCE stiff competition. The company continues to post strong additions to its wireless customer base, driving up revenue and EBITDA growth.
But Telus is more than that. This telecom giant is leading the industry in its 5G network preparation and coverage and in its wireless positioning, with high-growth assets such as TELUS Health and TELUS International. The Telus Health Electronic Medical Record 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. The growth that is possible in digitizing the healthcare industry is huge, as this system will provide benefits such as improving patient outcomes, allowing for better management of chronic disease and facilitating and enabling self-care.
Lastly, and very importantly for TFSA and RRSP investors, Telus’s dividend has a long history of semi-annual dividend increases, with a seven-year compound annual growth rate (CAGR) of 11.4%. Telus stock’s dividend yield is currently 4.65%, and we can expect a high single-digit annual dividend-growth rate going forward.
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.