Better Buy: Rogers Communications or BCE Stock?

With a potential merger on the way for Rogers stock, should investors throw out their BCE stock in favour of the merger?

It’s a fair question these days. With a looming merger between Rogers Communications (TSX: RCI.B) and Shaw Communications (TSX: SJR.B), it’s becoming less clear if BCE (TSX: BCE) will remain in the top spot. Even if it doesn’t, has Rogers stock become overvalued these days, or BCE stock for that matter?

Let’s look at both today and see which is the better buy for Canadians on the TSX today.

Rogers stock

It cannot be denied that becoming a larger company will make Rogers stock more powerful. It will bring in more revenue, more customers, and just more overall. However, anticompetitive concerns raised concerns over the $20-billion deal, which didn’t even include debt.

Investors in Rogers stock were also not impressed when the company stated it would sell off Videotron to “amplify” Freedom Mobile’s competitive impact. However, after making this statement to the committee on industry and technology, Rogers management went on to state that it doesn’t feel this deal will pose a threat to Rogers.

Investors may be concerned about the immediate future, with more clients moving towards Freedom Mobile and its owner Quebecor. Rogers wanted to make this Shaw deal no matter what, and that now looks like it may have offered up more than the company should have.

As for valuation, Rogers stock sits at a 3.03% dividend yield. On share price, Canada’s largest wireless service provider is on par with a year ago. So right now, it looks like investors don’t know what to think of the stock.

BCE stock

Then there’s BCE stock, which stands to have a major competitor on its hands when and if the Shaw and Rogers deal finalizes. Yet the company remains holding about 60% of the market share when it comes to telecommunications. Plus, it also has the fastest internet with its quick 5G rollout.

Even so, BCE stock continues to try delay tactics to at least slow down the merger. This includes not providing immediate access to Quebecor for using the company’s infrastructure, which the company has requested from its peers such as Rogers. Yet this doesn’t look like it will go far, as the Canadian Radio-Television and Telecommunications Commission (CRTC) stated telecom companies must provide access to local networks. This is to ensure no Canadian is left without access.

All this comes as BCE stock saw lower profits year over year, as did its fellow peers. It looked like the lows of the last six months were finally catching up to it. However, there was a recovery in the market over the last two months. This provided BCE stock with some growth that may continue for the next quarter.

Meanwhile, BCE stock offers a 6.15% dividend yield, though shares are down 7% in the last year as of writing. So what should Canadians consider when investing in telecom stocks?

Bottom line

Stay out of it. I would love to recommend one or the other here, but the future looks so uncertain at this stage I can’t in good conscious say you should absolutely choose one or the other. If you’re a retiree that may need this income in the next year or so, I would choose to just stay away all together for now.

However, long-term investors may want to consider the dividend offered with BCE stock. Furthermore, this rebound should see a nice bump in share price. As for Rogers stock, it doesn’t have as great of a deal at the current moment.

All in all, this eventual potential merger is likely coming. It could fail, Quebecor could fail, the Rogers merger could fail, but these are all ifs. For now, in this poor economic scenario if there’s anything you can count on at this point, it’s really just the dividend offered by BCE stock.

Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool recommends Rogers Communications. The Motley Fool has a disclosure policy.

More on Dividend Stocks

Piggy bank wrapped in Christmas string lights
Dividend Stocks

The $7,000 TFSA Move Most Canadians Leave Until December

An earlier TFSA contribution can simplify your plan, even when the immediate tax saving is smaller than you expect.

Read more »

diversification is an important part of building a stable portfolio
Dividend Stocks

Diversification 101: How Beginners Can Protect Against Market Shocks

Stocks like TD Bank and Fortis provide an anchor to a well-diversified portfolio for resilient long-term performance.

Read more »

man makes the timeout gesture with his hands
Dividend Stocks

Why Dividend Cuts Happen and How to Spot the Warning Signs

Learn why dividend cuts happen and how to spot warning signs, using BCE and TELUS to examine cash flow, debt,…

Read more »

woman stares at chocolate layer cake
Dividend Stocks

Just Turned 50 With Little Saved? Here’s Where to Start

This investing strategy can reduce risk while still delivering decent yield.

Read more »

Trans Alaska Pipeline with Autumn Colors
Dividend Stocks

1 Top Canadian Dividend Stock Down 17% to Consider Now for Lifelong Income

This company has increased the dividend annually for more than three decades.

Read more »

Senior uses a laptop computer
Dividend Stocks

A 4.9% Dividend Stock I Plan to Hold Long Term: What $5,000 Would Collect

This is a solid utility stock to consider on dips for a long-term portfolio with a focus on growing income.

Read more »

shopper carries paper bags with purchases
Dividend Stocks

Your GIC Pays 3% to 4%: This TSX Stock Pays You Every Month Instead

SmartCentres pays more income than an illustrative GIC, but a modest unit-price decline could erase the first-year advantage.

Read more »

the word REIT is an acronym for real estate investment trust
Dividend Stocks

REIT Investing: I’m holding SmartCentres for its 98.1% Occupancy

SmartCentres’ fundamentals remain solid. Besides high occupancy, rental growth and a high-quality tenant base are positives.

Read more »