Better Telecom Buy: Telus Stock or BCE?

Take a closer look at these two top TSX telecom stocks to determine which might be a better investment right now.

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High inflation, aggressive interest rate hikes, and slowing economic growth have impacted consumer spending throughout the country. Due to lower spending, several sectors of the Canadian economy have suffered, even blue-chip stocks in the telecom sector.

Despite underperforming the broader market over the last year, the industry’s weakness has made top telco stocks more attractive for investors with long investment horizons.

High-quality companies with wide economic moats, strong long-term growth prospects, and solid underlying businesses can be excellent investments even amid weakness.

These companies have the cash flow necessary to stay afloat during harsh market environments. Better yet, these stocks continue paying dividends, ensuring that shareholders continue to get returns on their investments.

Today, we will look at two of the top TSX telecom stocks to see which one might be the better pick for your self-directed portfolio today.

Telus

Telus (TSX:T) is a fundamentally strong communication stock. Despite facing a harsh economic environment, Telus managed to grow its customer base significantly over the last year. In the last 12 months, it added over 400,000 new mobile and fixed-line customers, reflecting a growth of over 30% from the last year.

Telus stock also saw its quarterly revenue grow by 2.8% year over year and its adjusted quarterly earnings before interest, taxes, depreciation, and amortization (EBITDA) increase by 9.4%. As of this writing, Telus stock trades for $22.02 per share. Down by over 23% from the same time last year, it offers its shareholders a juicy 6.83% dividend yield supported by strong recurring revenue.

BCE

BCE (TSX:BCE) is another excellent telecom stock on the TSX. Headquartered in Verdun, BCE stock has seen a slower income growth due to lower household spending. Yet, BCE stock posted a 2.1% year-over-year growth in its total revenue. Its adjusted EBITDA increased by over 2%.

In light of the current broader economic situation, BCE plans to enact measures to reduce its capital spending in 2024. It is scaling back its fibre expansion and cutting its workforce to save an estimated $500 million this year.

Due to these proactive measures, BCE stock looks set to boost its profitability this year and continue rewarding investors with high-yielding dividends. As of this writing, the $41.11 billion market capitalization stock trades for $45.06 per share.

Down by 30.12% from the same time last year, its dividend yield has become significantly inflated, paying its shareholders a juicy 8.85% dividend yield.

  • We just revealed five stocks as “best buys” this month … join Stock Advisor Canada to find out if Telus made the list!

Foolish takeaway

Despite slowing economic activity, telecom services will remain essential. As 5G technology becomes increasingly integrated, leading providers like BCE stock and Telus stock will continue seeing significant long-term growth.

With an almost similar market share of the Canadian telecom industry, either could be a good pick. Since BCE has a more significant infrastructure for 5G technology and offers higher-yielding dividends, I would pick that over Telus stock for the long run if I had to choose between the two.

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 Adam Othman 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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