Better Buy: BCE Stock or TELUS Stock?

BCE stock and TELUS stock are both blue-chip stocks for dividend income. One is a slightly better buy. Here’s why!

| More on:
stock research, analyze data

Image source: Getty Images

It makes good sense to compare and contrast among industry peers to determine which may be the best investment, as they’re typically exposed to same industry challenges. This is why we often see stocks in the same industry moving in tandem. This is the case for big Canadian telecom stocks BCE (TSX:BCE) and TELUS (TSX:T).

BCE Chart

BCE and TELUS data by YCharts

Above shows the 10-year price action of the stocks moving in tandem. Which is a better buy today? Read on for a quick comparison!

Dividend fun facts

Based only on the dividend yield, BCE beats TELUS. At writing, BCE stock offers a dividend yield of 6.44%, which provides almost 24% more income than TELUS stock’s yield of 5.20%. So, BCE attracts investors seeking current income.

Furthermore, the dividend stocks are Canadian Dividend Aristocrats that have a track record of paying increasing dividends. BCE stock has hiked its dividend for 14 consecutive years with a five-year dividend-growth rate of 5.1%. TELUS stock has raised its dividend for 19 consecutive years. In the last five years, its dividend increased at a compound annual growth rate of 6.6%.

As a smaller player, TELUS has offered higher dividend growth than BCE over the last 20 years. This trend will likely continue.

BCE’s trailing 12-month (TTM) payout ratio was 127% of earnings and 107% of free cash flow. In comparison, TELUS’s TTM payout ratio was 74% of earnings and 102% of free cash flow.

Financial position

The Canadian telecoms are capital intensive. From 2019 to 2022, 63% of BCE’s operating cash flow went into capital investments. TELUS’s capital spending in the period was even more extravagant — using 89% of operating cash flow.

Although BCE has a higher credit rating of BBB+ than the BBB rating for TELUS, it’s a little scary to see BCE having accumulated losses of $3.6 billion at the end of 2022. On the contrary, TELUS’s retained earnings of $4.1 billion provide better peace of mind.

This is not to say that BCE’s dividend is in immediate danger because between its free cash flow and current assets, it should have sufficient liquidity to protect its dividend. Otherwise, BCE wouldn’t have raised its dividend by 5.2% last month. I’ll have you know that its 5% dividend-growth rate has been very consistent over the last decade.


At $60.13 per share at writing, BCE stock trades at a discount of 8% according to the analyst consensus 12-month price target. Essentially, then, the stock is fairly valued. At $26.99 per share, analysts believe TELUS stock is undervalued by 14%.

Investor takeaway

Both stocks have poor price momentum currently. Their technical charts are unappealing. That said, both stocks could still attract value investors. Particularly, blue-chip BCE offers a higher yield of 6.4% for investors who need greater current income.

TELUS stock offers slightly better margin of safety from a valuation perspective. As well, it should continue to provide higher dividend growth. Because of this, I think TELUS is a better buy. And long-term investors should look for an entry point in TELUS.

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 Kay Ng has positions in TELUS. The Motley Fool recommends TELUS. The Motley Fool has a disclosure policy.

More on Dividend Stocks

money cash dividends
Dividend Stocks

Sitting on $10K? Invest in This TSX Stock for a Chance at $160K in 10 Years

Stocks are down, but don't count them out. TFSA investors should continue to invest in strong companies that should recover…

Read more »

analyze data
Dividend Stocks

How Much Do You Need to Invest to Give Up Work and Live Only Off Dividend Income?

Here's an honest assessment of how difficult it is to achieve "quit-your-job" levels of passive income.

Read more »

Profit dial turned up to maximum
Dividend Stocks

2 TSX Dividend Stocks With Seriously Huge Payouts

The TSX telecom sector has some great high-yielding companies up for grabs.

Read more »

TFSA and coins
Dividend Stocks

Dividend Stocks With Yields TFSA Investors Should Lock In Now!

Are you looking to build a passive-income stream? Here are two top dividend stocks to load up on in your…

Read more »

A plant grows from coins.
Dividend Stocks

2 Young TSX Stocks You’ll Be Glad You Bought in 10 Years

Youth means nothing when you plan to hold strong companies long term. These two TSX stocks should therefore be first…

Read more »

Man with no money. Businessman holding empty wallet
Dividend Stocks

Is it a Trap? 3 TSX Stocks With Ultra-High Dividend Yields 

Who doesn’t love dividends? But the high-interest rate environment makes ultra-high dividends unsustainable. Are these stocks a value trap?

Read more »

Value for money
Dividend Stocks

3 Value Stocks for Superior Returns in 2023

Given their solid underlying businesses, stable cash flows, high dividend yields, and attractive valuations, these three undervalued TSX stocks could…

Read more »

Financial technology concept.
Dividend Stocks

2 TSX Value Stocks to Buy for Peace of Mind (and a Crazy-Good Deal)

2 TSX stocks that could outperform in the long term.

Read more »