BCE (TSX:BCE) and Telus (TSX:T) have long been Canadian Dividend Aristocrats because of their consistent dividend growth and dominant positions in the telecom industry. Both offer solid dividends and reliable cash flow and are key players in Canada’s communications infrastructure. BCE tends to have a higher yield, making it attractive for immediate income. Meanwhile, Telus focuses on growth and innovation, especially in areas like healthcare tech. So, which comes out on top?
BCE stock
BCE stock has long been a solid choice for passive-income investors on the TSX due to its attractive dividend yield, currently sitting at 8.22% at writing. The company’s revenue for the trailing 12 months stands at $24.57 billion, and its quarterly earnings growth is a strong 55.5% year over year. This is encouraging for income investors, especially with BCE’s large market cap of $44.26 billion. However, it’s important to note the company is facing a slight decline in quarterly revenue growth. Therefore, some headwinds may be on the horizon. Still, with a reliable dividend history and stable cash flow, it remains a tempting option for passive income.
On the flip side, BCE’s payout ratio is extremely high at 182.79%, which could raise a red flag. A high payout ratio suggests that BCE is paying out more in dividends than it is earning. This could lead to sustainability concerns. Moreover, its debt load is quite heavy, with a total debt of $39.5 billion and a debt-to-equity ratio of 197.43%. While BCE has been able to manage its debts and maintain dividend payouts, including through a recent sale of MLSE, this high leverage could put pressure on future dividend growth or stability.
Altogether, BCE offers an impressive dividend yield and stable earnings, making it a solid choice for those seeking passive income. However, its high payout ratio and significant debt are factors to consider if you’re looking for long-term security. Investors might want to weigh the risk of dividend cuts in the future, especially if growth remains sluggish. If immediate income is your priority, BCE could be a strong candidate. Yet long-term growth and safety could be better found elsewhere.
Telus stock
Telus stock has long been a favourite among passive income investors on the TSX due to its solid dividend yield, currently sitting at 6.81% at writing. Its large customer base and investment in tech and innovation, like its ventures into health tech, make it a forward-looking company. With revenues of $19.91 billion over the trailing 12 months, Telus offers a strong foundation for income seekers, especially with earnings before interest, taxes, depreciation, and amortization (EBITDA) of $5.07 billion. The stock also shows signs of stability, with a relatively low beta of 0.72. Therefore, it’s less volatile than the broader market, which is comforting if you’re looking for steady returns.
On the downside, Telus has a very high payout ratio of 283.94%, which signals that the company is paying out significantly more in dividends than it is earning. While this hasn’t impacted its ability to pay dividends so far, it could raise concerns about sustainability in the long term. Telus also carries a hefty debt load of $29.25 billion. And while its total debt-to-equity ratio of 171.58% isn’t unheard of in the telecom industry, it’s something to consider if you’re risk-averse.
In short, Telus provides a decent dividend yield and has future growth opportunities in tech. This can be appealing if you’re looking for passive income with growth potential. However, its high payout ratio and significant debt are things to watch if you’re concerned about long-term dividend sustainability. If you’re comfortable with some risk and want exposure to both income and innovation, Telus could be a solid choice for your portfolio.
Bottom line
When it comes to passive income, BCE stock might edge out Telus for those seeking higher upfront yields, with a current dividend yield of 8.22% compared to Telus’s 6.81%. BCE offers more immediate income, making it ideal if you’re looking for cash flow now. However, Telus has a more growth-oriented approach, especially with its ventures into tech and healthcare. And this could offer long-term potential. If you want higher income right away, BCE is the way to go. But if you’re okay with a slightly lower yield and like future growth, Telus is worth considering!
