Slow economic growth and high interest rates have affected consumer spending across Canada in the last year. This is one of the key reasons why communications sectors on the TSX have underperformed the broader market during this period.
Nonetheless, this sector-wide weakness has made some quality communication stocks look even more attractive to buy right now as they show resilience and long-term growth potential even amid challenges. These companies have strong cash flows, which enables them to offer attractive dividends, making them even more appealing for income investors. Here are two of the best TSX communication stocks that I think are worth buying today.
BCE stock
If you’re looking for quality communication stock on the Toronto Stock Exchange, the Verdun-based giant BCE (TSX: BCE) stands out as a top evergreen choice. The company currently has a market cap of $40.9 billion as its stock trades at $44.84 per share after losing nearly 29% of its value in the last year. These sharp declines, however, have made BCE stock look undervalued right now based on its long-term growth outlook. Also, the recent dip in this communication stock could be a great opportunity for you to lock in its really impressive 8.9% annualized dividend yield.
Although dismal household spending due to slow income growth has taken a toll on BCE’s financial performance of late, the company still managed to post a 2.1% YoY (year-over-year) positive growth in its total revenue last year to $24.7 billion. Similarly, its adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) in 2023 rose more than 2% from a year ago to $10.4 billion, with a stable EBITDA margin of 42.2%.
BCE plans to reduce its capital expenditure by at least $500 million in 2024 by scaling back its fibre network expansion and saving costs by cutting workforce to deal with the ongoing macroeconomic challenges and unfavourable regulatory environment. Such proactive strategic initiatives should help the company boost its profitability and continue rewarding investors with increasing dividends over the long term.
Telus stock
Telus (TSX:T) is another fundamentally strong communication stock on the TSX you can consider buying on the dip right now. Telus currently has a market cap of $32.7 billion as its stock trades at $22.13 per share after sliding by 21.6% in the last year. At the current market price, the stock offers an attractive 6.8% annualized dividend yield and distributes these dividend payouts every quarter.
Despite a challenging market condition, Telus continued to expand its customer base by adding 404,000 new mobile and fixed customers, reflecting a strong 34% YoY growth over the previous year. Strengthening demand for the company’s bundled products and services drove its quarterly revenue up by 2.8% YoY to $5.2 billion. More importantly, its adjusted quarterly EBITDA jumped 9.4% from a year ago to $1.8 billion.
In 2024, Telus aims to achieve 2% to 4% operating revenue growth from the Telus Technology Solutions segment, while the segment’s adjusted EBITDA is expected to grow positively in the range of 5.5% to 7.5% YoY. Despite a largely weak macroeconomic outlook, these ambitious targets reflect Telus’s confidence and ability to post strong business growth, which could help this TSX communication stock appreciate in value.
