When it comes to Canadian telecom titans, BCE (TSX: BCE) and Telus (TSX: T) are two heavyweights vying for your investment dollars. Both boast impressive dividends, but which one deserves a spot in your portfolio as we navigate through 2025? With BCE offering a tempting dividend yield of approximately 12.2% and Telus not far behind at 7.7%, it might seem like BCE stock is the obvious choice. However, dividend sustainability is just as important as the payout itself. BCE’s payout ratio has reached a staggering 4,400%, raising concerns about its ability to maintain such high dividends. Meanwhile, Telus has kept its payout ratio at a more manageable 242.9%, making its dividends seem more reliable in the long run.
Source: Getty Images
The numbers
Recent earnings reports also paint an interesting picture. In the third quarter of 2024, Telus reported a net income of $280 million, marking a significant 105.9% increase from the same period the previous year. Operating revenue also saw a modest rise of 1.8%, reaching $5.1 billion. This indicates steady growth, even in a challenging economic environment.
Beyond traditional telecom services, Telus has been making strategic moves to diversify its revenue streams. This diversification not only hedges against risks in the telecom sector. It also positions Telus for future expansion in emerging industries. BCE stock, however, remains primarily focused on its telecom and media operations. BCE, while stable, may not offer the same long-term growth potential as Telus’s ventures.
Debt levels are another key factor when comparing these two dividend giants. BCE stock currently carries a total debt of approximately $40.08 billion, leading to a debt-to-equity ratio of 222.91%. Telus, in contrast, has a total debt of about $29.05 billion and a debt-to-equity ratio of 171.64%. While both companies are heavily leveraged, Telus appears to be in a slightly better position when it comes to managing its debt.
The stocks
Looking at stock performance over the past year, BCE stock has declined by approximately 43.97%. Meanwhile Telus has seen a decrease of about 23.27%. While both companies have faced challenges, Telus demonstrated better resilience in the market. Investors have been more optimistic about Telus’s ability to grow beyond telecom. Meanwhile, BCE stock has been seen as a more traditional, slow-moving dividend stock with fewer growth prospects.
Analysts have mixed opinions on both companies. Many express concerns about BCE’s high payout ratio and limited growth avenues, while Telus is often viewed more favourably due to its diversified business model and more sustainable dividend. That being said, both companies operate in a mature industry, and neither is expected to deliver explosive growth in the near future. Given this reality, choosing between BCE and Telus comes down to what an investor values most. That’s higher immediate income or a balance between dividends and growth.
Bottom line
If you’re an investor looking for a higher yield today and are comfortable with potential risks, BCE stock might be the right choice for you. However, if sustainability and future growth potential are your priorities, Telus seems to offer a more balanced proposition. With its lower payout ratio, diversified business ventures, and better overall financial health, Telus appears to be the more strategic pick for long-term investors.
At the end of the day, both BCE and Telus have their strengths and weaknesses. Yet, Telus’s lower debt, growing business segments, and more sustainable dividend make it the more attractive choice for 2025. Investors looking for a balance between yield and long-term stability may want to consider Telus as their preferred telecom stock moving forward.
