If you’re new to the world of investing and are seeking a solid starting point, the telecommunications sector within the TSX might be an excellent place to begin. With its essential services and stable cash flows, this sector offers a relatively stable investment landscape thanks to its oligopolistic nature.
Today, we’ll be diving into two companies that not only provide essential communication services, but also boast attractive dividend yields, making them ideal options for beginners looking for a combination of steady income and long-term growth potential.
Telus Corporation
Telus (TSX:T) is one of Canada’s largest telecommunications companies, providing a wide range of communication products and services, including wireless, data, voice, and internet services. In recent years, the company also made forays into tele-health and cloud services.
For dividend investors, Telus remains a popular pick thanks to a high forward annual dividend yield of 5.23%. Over the trailing five years, Telus has paid an average dividend yield of 4.95%, which is higher than the TSX average and has remained stable since.
Environmental, social, and governance conscious investors will be please to know that Telus has a strong focus on environmental initiatives, including reducing its carbon footprint, increasing energy efficiency, and promoting the use of renewable energy, earning a spot on the Dow Jones Sustainability World Index for several years.
BCE Inc.
Telus’s biggest competitor is BCE (TSX:BCE), which also provides a wide array of communication solutions, including wireless, broadband, television, and home phone services. However, BCE has diversified further into media, which includes television, radio, and sports entertainment.
Currently, BCE owns CTV, Canada’s largest private broadcaster, and has strong presence in sports entertainment through its ownership stake in Maple Leaf Sports & Entertainment, which owns prominent sports teams like the Toronto Maple Leafs and the Toronto Raptors.
Stock-wise, BCE pays one of the highest dividends on the TSX, with a forward annual yield of 6.45%. Historically, the stock has recorded a five-year average dividend yield of 5.51%. Low-volatility investors will also like BCE’s low five-year monthly beta of 0.48 — a sign of it being half as volatile as the market.
The Foolish takeaway
Both Telus and BCE are solid dividend stocks, but they share a common weakness: idiosyncratic risk from the telecom sector. Factors like rising interest rates or government legislation could severely weaken the outlook for this sector. In addition, sinking your portfolio in just two companies isn’t the best idea. To diversify further, consider adding more dividend stocks from other TSX sector (and the Fool has some excellent picks for those below!)
