Canada’s telecoms are often referred to as some of the best long-term investment options on the market. There are a myriad of reasons for that view, but among the big telecoms, let’s ask the question: Which big telecom stock should you buy?
Let’s take a moment to look at both Rogers Communications (TSX: RCI.B) and Telus (TSX: T) to answer that question.
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The case for Rogers
Rogers is the larger of the two telecoms and, by some measures, the largest telecom in Canada. The company offers its core subscription-based services to customers across the country, making it both a growth and defensive option for investors.
In addition to that core subscription business, Rogers also boasts a sizable media segment. That includes radio and television stations sprinkled across the country that generate an additional yet complementary revenue stream.
In fact, year-over-year revenue from that sports and media segment increased by 24%. Also worth noting is Rogers’s recent 12-year broadcasting deal with the NHL. That fact alone should drive ad revenue (and, by extension, share price) higher.
In short, the sheer size of Rogers, coupled with its defensive appeal, makes it a great option for investors to consider. And that’s without mentioning Rogers’s dividend.
Rogers offers investors a quarterly dividend. As of the time of writing, the yield on that dividend works out to a respectable 5.68%. This means that a $15,000 investment in Rogers will generate an income of just over $850.
That’s more than enough to generate a few shares through reinvestments. That being said, Rogers stopped providing investors with annual upticks to that dividend years ago. Instead, the company decided to focus on paying down debt and investing in growth.
That may make Rogers appealing to some growth-seeking investors, but the lack of increases could hurt over time.
The case for Telus
Telus is the smaller of the two telecoms but still packs a decent punch. Like Rogers, Telus offers the traditional bevy of subscription-based services, which help to generate a recurring and stable revenue stream.
Where Telus differs from Rogers is that the company lacks a media and sports arm. Instead, Telus has invested heavily in a series of digital services, offering solutions in the areas of health and agriculture, among others.
The digital services business has proven lucrative in recent years, with Telus reporting double-digit revenue growth from the segment. This impressively provides a level of diversification outside of its core subscription business.
Then, we have Telus’s quarterly dividend.
As of the time of writing, Telus offers investors an insane 7.73% yield. This means that a $15,000 investment in Telus will provide an income of just shy of $1,200. That’s enough to generate more than a few shares of Telus through reinvestments.
But that’s not even the best part.
Telus has provided annual or better upticks to that dividend going back two decades without fail. This fact alone makes the stock appealing for long-term investors who are seeking a juicy income.
Investors who aren’t ready to draw on that income yet should see Telus as a superb buy-and-forget investment.
The better Telecom stock to invest in right now is…
Both Rogers and Telus offer reliable revenue streams, growth and a juicy quarterly dividend. Rogers’s massive media segment (and the ad revenue it provides) is an impressive note, as is Telus’s expansion into digital services.
So then, what stock is the better fit?
The answer to that question really depends on investor preference. Prospective investors looking for an income-producing stock that can generate some growth will opt for Telus. For those investors, that yield may be too tempting.
For investors who are seeking a growth-first strategy, Rogers’s more conservative approach to payouts may prove reassuring.
In my opinion, Telus is the better option to buy right now, but both stocks are superb picks for any well-diversified portfolio.
