The Canadian telecom scene has been through a hurricane of volatility in recent years, to say the least. With telecom titan BCE (TSX: BCE) slashing its dividend payout, passive income investors may be wondering if the worst is over yet. And while BCE stock has struggled to gain traction, I think that its new payout is more than sustainable.
As I noted in a prior piece covering BCE and its big dividend reduction, I think there could be a long-term pathway to recovery and, with that, above-average dividend growth prospects. In any case, I have no idea if BCE’s pains will be subsiding anytime soon. There are a lot of issues to address before shareholders can feel comfortable again. And while buying the dip may seem wise, I think that there’s a better way to play the telecom scene while getting a much heftier dividend yield for doing so.
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Telus stock could be a better dividend bargain
While I’m not against picking up a few shares of BCE at around $30-32 while the dividend is just shy of the 6% mark, I just find Telus (TSX: T) and its massive 7.6% yield to be a better bet. Not only will you get more income, but the stock chart isn’t nearly as horrifying. Of course, it’s too early to tell if a bottom is already in the name. Either way, Telus stock seems somewhat less difficult to own than the likes of its now smaller rival.
In any case, Telus stock has a long way to go if it’s to see its prior highs of around $35 per share again. Industry headwinds have been tough, but recent quarters give investors something to be hopeful for, even if industry headwinds prevail for another few years. At the time of writing, T stock goes for 27.9 times trailing price to earnings (P/E), which is still not cheap for a name that’s lost more than 35% of its value from peak levels. Still, the growing, swollen dividend yield is so tempting. And if you can get behind the company’s turnaround story, I find the name to be a top pick in the ultra-high-yield space today.
So, what’s up next for Telus?
The company recently proposed to buy back Telus Digital after spinning off the business around four years prior. Indeed, perhaps there’s a bit of value to be unlocked as the firm looks to turn around the IT service provider that hasn’t really had the best time on its own following the 2021 spin-off. Deal or not, I’m a big fan of Telus’s balance sheet and the growth options it can provide the firm as it tries to sustain a comeback.
Additionally, Telus seems open to using generative artificial intelligence to save money in various areas, such as customer service. Any added margin gains are sure to be welcomed by investors as the company continues to slog through a difficult environment. In any case, I’m a fan of management and think the firm has what it takes to invest in long-term growth while keeping its fat dividend intact. For that reason, I like T stock more than most other dividend payers, yielding over 7%.
