Investing in recession-resistant dividend stocks that offer a tasty yield is a good strategy for generating a steady stream of passive income at a low cost. In this article, I’ll compare two such dividend growth stocks, Telus (TSX: T) and Verizon (NYSE: VZ), to see which is a better buy right now.
Image source: Getty Images
Is Telus stock a good buy right now?
Part of the Canadian telecom sector, Telus is among the largest companies that trade on the TSX. Valued at a market cap of $33 billion, Telus pays shareholders an annual dividend of $1.61 per share, translating to a forward yield of 7.3%.
While Telus is part of a mature and saturated sector, its total net customer additions in the third quarter (Q3) of 2024 stood at 347,000. While mobile net additions stood at 130,000, net additions for connected devices were higher at 159,000. Notably, focusing on customer service and connectivity meant its postpaid mobile phone churn was below 1% for the 11th consecutive year.
The company’s PureFibre network offers superior connectivity compared to traditional cable. Telus emphasized that network superiority drove 17% growth in premium rate plans.
Telus is well positioned to benefit from strong bundling strategies, as each household has subscribed to an average of 3.2 products. In Q3, its bundled mobile and home households saw an 8% year-over-year growth, resulting in higher average revenue per household, improved margins, reduced churn, and enhanced customer lifetime value.
Telus recently raised its dividends by 7% year over year, which is its 27th hike since 2011. With more than $26 billion returned to shareholders in the last 20 years, Telus has increased dividends for 14 consecutive years.
Given its strong operational metrics, diversified revenue streams, and consistent dividend growth, Telus remains a top investment choice. The company’s expansion into health and agriculture technology provides additional growth vectors beyond traditional telecommunications.
Telus stock is cheap, priced at seven times forward cash flow, and trades at a 10% discount to consensus price target estimates.
The bull case for Verizon stock
Verizon is a global telecom giant valued at US$125 billion by market cap. Despite its massive size, Verizon reported record EBITDA (earnings before interest, tax, depreciation, and amortization) of US$12.5 billion in Q3 of 2024. Its wireless service revenue grew by 2.7% year over year, while postpaid net additions stood at 239,000.
Verizon continues to invest heavily in its fiber infrastructure, which should drive future cash flow and higher earnings.
The company’s strong performance in Q3 can be tied to operational efficiency improvements, the successful launch of new products and services, and strong execution across business segments. Going forward, Verizon will continue to focus on strategic acquisitions, network improvements, and new product developments.
Verizon has raised its annual dividends to US$2.71 per share in 2024, up from US$2.2 per share in 2014. Its growing dividend has meant that Verizon offers shareholders a high dividend yield of 6.2% to shareholders.
Priced at 10 times forward free cash flow, Verizon trades at a higher multiple than Telus. Moreover, Telus is expected to grow earnings and free cash flow at a higher rate than Verizon, making the TSX stock a better buy right now.
