BCE Stock Has a Nice Yield, But This Dividend Stock Looks Safer

BCE stock may have a high yield, but look beyond that, even if it means a lower dividend.

Amy Legate-Wolfe

Amy became interested in investing in 2018 after having her first daughter. After receiving a masters degree in journalism from Western University, she became frustrated that the finance industry remained a confusing place for Canadians like her: new parents, millennials, and other young people who needed to understand their finances. Now, Amy focuses on tech companies and renewable energy for growth opportunities, coupling that with long-term investing strategies and equities. She also provides investors with a daily newsletter, Canada Stock Digest, for daily market updates. Before joining Motley Fool Canada, she wrote for major news organizations including HuffPost, CTVNews.ca, and CBC. When she’s not researching investing strategies, Amy’s time is pretty much monopolized by her two wild daughters, but in what little spare time she has she loves to do yoga, go on walks with her dog, and travel with her husband. Follow Amy on LinkedIn and Canada Stock Digest. Favorite Investment Quote: “October: This is one of the particularly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” – Mark Twain

Published May 9, 2025 4:40 pm EDT

When it comes to building long-term wealth in a Tax-Free Savings Account (TFSA), dividend stocks can play a big role. They provide regular income, often grow that income over time, and, if you choose wisely, can deliver strong total returns. One stock that often grabs attention is BCE (TSX:BCE). Its yield is among the highest in the country. But when you dig a little deeper, another stock, Bank of Montreal (TSX:BMO), starts to look like the safer choice for your hard-earned dollars.

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BCE

Let’s start with BCE stock. It’s Canada’s largest telecom company, offering everything from wireless and internet to television and media services. With a dividend yield sitting around 13.43% as of writing, it looks like a dream for income investors. That kind of yield can turn heads, especially when many Guaranteed Investment Certificates and high-interest savings accounts barely crack 5%.

But there’s a catch.

BCE’s recent results suggest the business isn’t in its strongest position. In the first quarter of 2024, BCE stock posted operating revenue of $6.01 billion, down slightly from the same period a year before. Net earnings fell to $457 million from $788 million in the first quarter (Q1) of 2023. While the dividend stayed intact, this kind of earnings decline raises eyebrows. If the business continues to struggle, BCE stock might eventually have to make the hard call of cutting the dividend. It hasn’t happened yet, but it’s something to watch.

The telecom sector, in general, faces some pressure. Growth is slowing, competition is fierce, and the cost of maintaining infrastructure is high. BCE stock has been spending heavily to upgrade its networks, and higher interest rates haven’t made that any easier. Debt-servicing costs are up. The company is still profitable, but margins are under pressure. And that means future dividend growth could be limited or paused.

BMO

Now, let’s take a look at Bank of Montreal. The yield is lower at around 4.8% as of writing, but the overall picture is stronger. In the first quarter of 2025, BMO delivered net income of $2.14 billion, up from $1.29 billion the year before. Adjusted earnings per share (EPS) came in at $3.04, up from $2.56. These are the kinds of numbers you want to see from a dividend-paying stock. Strong earnings growth helps support consistent and growing dividends.

BMO also has a long track record of paying dividends. It has paid one every year since 1829. That’s not a typo. Nearly two centuries of dividends. While past performance isn’t everything, that kind of consistency can give investors some confidence. BMO increased its dividend again in early 2025, continuing its pattern of rewarding shareholders even in choppy markets.

What makes BMO even more compelling is its diverse business. It earns money from retail banking, commercial lending, wealth management, and capital markets. It also made a big move in the U.S. with its acquisition of Bank of the West, giving it a much stronger presence south of the border. That helps diversify earnings and opens up new growth opportunities. The U.S. market can be a tough one to crack, but BMO is already seeing results from this expansion.

Foolish takeaway

One thing to keep in mind is that banks can be cyclical. If the economy slows down sharply, banks may see more loan defaults or reduced earnings. However, the big Canadian banks have strong capital reserves and are closely regulated. Even during the pandemic, BMO stayed profitable and continued paying dividends. That says a lot about its resilience.

In a TFSA, where all returns are tax-free, dividend-paying stocks can work wonders over time. The key is choosing companies that not only pay well now but are also likely to keep growing and supporting those payments long term. A stock that yields 13% but cuts its dividend in a few years may leave you worse off than a stock that yields 4.8% and keeps growing steadily.

So, while BCE stock is still a decent option for income, it carries more risk today. If you’re building your TFSA for the long haul and want something more secure, BMO might be the better bet. It may not pay quite as much upfront, but it offers strong financial performance, dividend growth, and a reliable business model.