A Dividend Heavyweight I’d Buy Over BCE Right Now

Telus may be a more enticing buy than BCE stock if you want growth alongside your fat dividend yield!

| More on:
Gold medal

Image source: Getty Images.

BCE (TSX:BCE) stock is a favourite among many Canadian dividend investors. The name provides a very generous, safe amount of passive income (6.26% yield at writing) alongside slightly less volatility versus the broader TSX Index (0.48 beta). While I’m not against looking to the name if you seek to give your income portfolio a jolt, investors should know that they probably won’t get a lot in the way of capital appreciation over the years.

Over the past five years, BCE stock is up less than 10%. For young investors seeking to build up wealth over the decades, there are far better options out there that can provide the perfect mix of income and appreciation.

Indeed, the biggest knock against BCE is its growth profile. The $56 billion behemoth has a media business that acts as quite the drag on growth. Further, it has been quite vulnerable amid macro headwinds. Not to mention the rise of streaming has taken a major stride away from the legacy media firms. In any case, BCE isn’t a buy for its growth, it’s a buy for its resilient cash flow stream and rich history of rewarding investors with frequent dividend hikes.

At 20 times trailing price-to-earnings, BCE stock still isn’t what you’d consider cheap, even after the stock’s recent slide off April 2022 highs. As shares of BCE decline, its dividend yield creeps higher, beckoning in income-hungry dip-buyers.

For that reason, BCE seldom goes on sale by a considerable amount. Retirees just love the name and they should, as it’s one of the dividend heavyweights that can deliver. What you pay is essentially what you’ll get from the name: a big dividend and minimal capital appreciation over time.

As a young investor, I’d argue there are better, cheaper places to put money to work in this climate. Consider the following dividend heavyweight:


Telus (TSX:T) is a long-time rival of BCE, but it’s one that I think can deliver more total returns (capital gains plus dividends) over the next 10 years. I prefer Telus for its lack of media business and superb customer service track record. Further, the firm is in full-on growth mode and consistently wins the title of Canada’s best network. As Telus continues to build out its 5G infrastructure, I expect more big wins to come.

The $39.6 billion telecom sports a respectable 5.1% dividend yield. With a 24.2 times trailing price-to-earnings multiple, Telus stock is historically pricy. So, why pay more for less yield with Telus stock over BCE? Its earnings and free cash flows are growing at an impressive rate. Recently, the firm noted it expects free cash flow to soar 60% to $2 billion on the year, thanks in part to a curbing of capital expenditures.

As Telus pulls the brakes a bit amid a higher-rate world, I expect some very generous dividend hikes could be in the cards.

The bottom line on Telus over BCE stock

BCE stock is a great buy if you’re retired, are close to being, or just need the extra passive income. For everyone else, I think Telus has a lot more to offer as it looks to find the perfect balance between growth and rewarding shareholders.

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 Joey Frenette has no position in any of the stocks mentioned. The Motley Fool recommends TELUS. The Motley Fool has a disclosure policy.

More on Dividend Stocks

Happy diverse people together in the park
Dividend Stocks

Gen Z Investors: How to Make $2.8 Million Before Retirement

Gen Z investors have one thing to their advantage: time. Invest wisely and practically any investment could turn into millions.

Read more »

A plant grows from coins.
Dividend Stocks

The 2 Top Monthly Dividend Stocks for March 2023

These are the top two monthly dividend stocks you can buy in Canada in March 2023.

Read more »

Canadian Dollars
Dividend Stocks

Got $6,500? Earn $48/Month Tax-Free Passive Income

High-dividend-paying Canadian stocks include Diversified Royalty. Let's see how a TFSA investment of $6,500 can help you earn $48 in…

Read more »

Various Canadian dollars in gray pants pocket
Dividend Stocks

Need $100? The Best Dividend Stocks for Monthly Income

Here are two of the best monthly dividend stocks you can buy in Canada right now for passive income.

Read more »

Businessperson's Hand Putting Coin In Piggybank
Dividend Stocks

TFSA Investors: Make $100 Per Month With This TSX Dividend Stock

This top TSX dividend stock could help you earn $100/month in tax-free, passive income.

Read more »

Wireless technology
Dividend Stocks

2 TSX Stocks I’d Buy With a Tax Refund

If you have a tax refund coming your way, these two TSX stocks could provide you with stellar long-term income…

Read more »

man window buildings
Dividend Stocks

How to Invest in Retail Stocks When Everyone’s Talking About a Recession

Canadian retail stocks like grocery stores provide stable performance. If you like more yield, you can seek an entry point…

Read more »

Canadian energy stocks are rising with oil prices
Dividend Stocks

The 3 Industrial Stocks That Keep Canada’s Economy Going

Three industrial stocks with solid fundamentals are safer options in the current market environment and should add stability to your…

Read more »