Better Buy: BCE Stock vs. Telus

BCE (TSX:BCE) and Telus (TSX:T) are wonderful dividend stocks that Canadians should give a second look on the recent dip.

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The Canadian telecoms are great passive-income plays to stash at the core of your TFSA (Tax-Free Savings Account). While the dividend heavyweights won’t give you considerable capital gains compared to some of the growthier companies on the TSX Index, they are capable of helping you power through, even the harshest of economic climates.

With a recession just waiting around the corner and stock valuations still slightly lofty depending on where you look, I’d argue that names like BCE and Telus can help you get good results over time in a market environment where prospective returns may be modest.

Playing defence with Canadian telecom stocks

A recession is never ideal, even for defensive companies. Though telecoms aren’t 100% immune from economic disturbances and higher interest rates, their high dividend yields and lower volatility compared to the broader market averages can come in handy when turbulence kicks in, and broader earnings take a hit.

Finally, it always helps to be part of a triopoly. The Big Three telecoms, as they’re called, are profoundly dominant. Canadians simply do not have many options when it comes to wireless carriers. As such, it’s the shareholders in Big Three companies that stand to benefit from the wide moats that protect their economic profits.

In this piece, we’ll concentrate on BCE (TSX:BCE) and Telus (TSX:T): two of the most popular (and bountiful from a yield standpoint) telecoms in the Canadian market.


For yield seekers, BCE stock will almost always be the better bet. The telecom behemoth has a solid wireless business, but a media segment that could drag on growth over time. Regardless, BCE’s relative growth disadvantage is made up for its juicy dividend that’s incredibly safe and subject to consistent increases over time. The stock trades at just north of 21 times trailing price to earnings (P/E), with a huge 6.15% dividend yield.

With a 0.48 beta, BCE stock is a less wobbly ride than the TSX. This low correlation to the markets makes BCE a compelling portfolio diversifier that could help you tilt the odds in your favour. Shares are currently down around 14% from their all-time highs after the past year of turbulence.


Telus is another yield-heavy telecom that’s taken a bit of a hit over the past year. The stock is down around 19% from its peak. At 24.33 times trailing P/E, Telus stock is pricier than its bigger brother BCE. It’s not just more expensive, but the yield is more than 1% lower at 5.02%.

Undoubtedly, the $40 billion telecom pure play is a better bet for new investors who seek long-term growth and income. Like BCE, the beta of 0.66 implies less correlation to the TSX Index.

Better buy: Telus or BCE stock?

You can’t go wrong with either telecom titan, as we move into a recession. However, if I had to choose one, it’d have to be BCE at these valuations. The stock is off more from its high. Further, shares offer more in the way of yield and value.

Though Telus’s growth prospects seem brighter, I think the valuation more than factors this in. As such, BCE stock seems like the better bet for most Canadian investors for now.

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.

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