The top turnaround story in 2025 is the end of a sector’s slump. Communication services stocks have regained lost ground after a dismal performance last year. Nearly all 5G stocks, except Rogers Communications, are in positive territory thus far this year.
If you want exposure to the rejuvenated sector and to earn recurring dividend income, choose between TELUS (TSX:T) and Cogeco Communications (TSX:CCA). A third option, not a telco stock but part of a broader umbrella, is Stingray Group (TSX:RAY.A).
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Multi-year dividend growth program
TELUS, a $30.9 billion telco giant, has sustained and kept investors whole on quarterly dividends. As of March 28, 2025, the share price is $20.44 (+6.7% year-to-date), while the dividend offer is 7.9%. Its President and CEO, Darren Entwistle, reminded investors that the multi-year dividend growth program is in its 15th year.
Entwistle said strategic investments in broadband networks and a unique asset base assure continued advancement of TELUS’ financial and operational performance. Both should support consistent, long-term, profitable growth. The moderating consolidated capital expenditures also contribute to the consolidated free cash flow (FCF) guidance of $2.2 billion in 2025.
Ongoing transformation
Cogeco Communications is attractive for its strong free cash flow generation capability and fibre-to-the-home expansion projects. The $2.9 billion telecommunications corporation owns Cogeco Connexion (Cogeco and Oxio brands) in Canada and Cogeco US in America.
In Q1 fiscal 2025 (three months ending November 30, 2024), revenue dipped 1.2% year-over-year to $738.7 million. Profit during the quarter rose 11.9% and 8% to $107.2 million and $148.8 million compared to Q1 fiscal 2024.
According to management, the three-year transformation program is underway. The program aims to improve agility and competitiveness. Cogeco Communications will focus on operational optimization, advanced analytics, digital, and an elevated customer experience. If you invest today ($68.40 per share), the dividend offer is a hefty 5.3%. CCA is up 3.1%-plus year-to-date.
Alternative to pure-play telco stocks
Stingray is an alternative to pure-play telco stocks because its business falls under the broader scope of communication services. It provides audio and video experiences to consumers, businesses, retailers, and advertisers. At $8.91 per share, RAY.A outperforms year-to-date (+19%) and pays a decent 3.3% dividend (quarterly payout).
Besides content streaming and digital music distribution, the $608.3 million global music, media, and technology company offers business services and advertising solutions. Stingray operates on six continents (160 countries) and owns over 100 radio stations. Moreover, it boasts an extensive retail audio advertising network to help clients drive brand awareness.
In Q3 fiscal 2025 (three months ending December 31, 2024), revenue and net income increased 7.9% and 73% respectively to $108.2 million and $15.7 million versus Q3 fiscal 2024. Cash flow from operating activities rose 14.5% year-over-year to $35.4 million. Eric Boyko, co-founder, President and CEO of Stingray said the expanded FAST portfolio or over-the-top channels contributed to the strong financial results.
FAST channels offer entertainment content like traditional cable but streamed online with advertisements. According to Boyko, Stingray will pursue strategic and growth opportunities using an additional $80 million in financing from a banking syndicate. The stock’s overall return in five years is 251%-plus.
Solid choices
TELUS and Cogeco Communications are solid choices for their positive business outlooks. Stingray Group is equally viable because of numerous growth catalysts and opportunities.
