Better Dividend Buy: Telus or BCE Stock?

When it comes down to Telus or BCE stock, a potential merger of telecom giants is the biggest dividend threat.

Amy Legate-Wolfe

Author Bio Amy became interested in investing in 2018 after having her first daughter. After receiving a masters degree in journalism from Western University, she became frustrated that the finance industry remained a confusing place for Canadians like her: new parents, millennials, and other young people who needed to understand their finances. Now, Amy focuses on tech companies and renewable energy for growth opportunities, coupling that with long-term investing strategies and equities. She also provides investors with a daily newsletter, Canada Stock Digest, for daily market updates. Her work can also be found at Canada's National Observer, where she writes on the business side of climate action. Before joining Motley Fool Canada, Amy wrote for major news organizations including HuffPost, CTVNews.ca, and CBC. When she’s not researching investing strategies, Amy’s time is pretty much monopolized by her two wild daughters, but in what little spare time she has she loves to do yoga, go on walks with her dog, and travel with her husband. Social Media Follow Amy on LinkedIn and Canada Stock Digest. Favorite Investment Quote “October: This is one of the particularly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” – Mark Twain

Published May 23, 2023 2:00 pm EDT

Telus (TSX: T) and BCE (TSX: BCE) have both been dipping in the market these days. The move came after lower first-quarter profits, just as competition looks to be on the way with a potential Rogers takeover of Shaw.

Despite this, BCE stock and Telus stock remain top dividend stocks, at least at this point. But when it comes to which one is better? That we’ll have to dig into a bit more.

Telus stock

So let’s first take a look at Telus stock. The company recently increased its dividend, despite reporting lower profits. This might be because Telus remains confident in its wireless exposure. In particular, it has the most exposure in Alberta, British Columbia, and Ontario.

That being said, the new merger could severely impede on this exposure. Therefore, Telus stock has been working aggressively to provide bundling packages for its wireless and residential services. Furthermore, it has accelerated the building of its fibre-optic network to provide the fastest internet speeds.

Telus stock remains against the merger of Rogers and Shaw, but the company hopes now it will be prepared for other competition that might come its way. The company reported $5 billion in revenue during the first quarter, an increase of 16% year over year. This boost mainly came from its health business after acquiring LifeWorks, as well as the recovery of new subscribers.

Even so, profit was down a whopping 45%. Yet Telus stock still managed to increase its dividend by 4%. T currently offers a yield at 5.24% as of writing.

BCE stock

As for BCE stock, the telecommunications giant has been investing hard into its infrastructure. This has included its fibre-optic internet, but also its 5G wireless network. The company currently holds the fastest internet in the country, which should certainly help with a Rogers-Shaw merger.

Management seems unconcerned, as BCE stock remains the largest market cap of the telecom giants. That doesn’t look likely to change, especially as its bolsters its performance ahead of such a merger. Still, investors might be put off by the departure of its chief financial officer, retiring in September, just as a merger potentially comes online.

BCE reported $6 billion in revenue during the first quarter, a 3.5% increase year over year. Profit was also down by $788 million, similar to Telus’, but mainly due to inflationary cost pressures, according to management.

While BCE stock didn’t raise its dividend this time around, it might be holding off until the Rogers-Shaw deal goes through. In that sense, the dividend might actually be a bit safer for investors. It currently sits at a 6.05% yield.

Bottom line

Both Telus and BCE stock are well-established dividend aristocrats, with years and years of dividend growth. That’s unlikely to go away during a recession, or even during this potential merger. In that sense, both would be a strong buy.

But if you want the best and safest deal, I would instead go with BCE stock. It’s the most established with safe income from dividends, as well as share growth. And with the majority of the market share, it makes its dividend incredibly safe today. Plus, shares of BCE stock are down 7% in the last year, compared to a decline of 13.5% in Telus stock as of writing.