Canada’s big telecom stocks are often regarded as some of the best long-term options for investors. There are a variety of reasons for that view, ranging from their defensive appeal and growth potential to those juicy dividends.
But which of those top telecom stocks should you add to your portfolio?
Let’s try to answer that by looking at each of them.
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BCE: The big telecom with some big issues (for the moment)
Depending on the metric you choose, BCE (TSX: BCE) is either the largest of the top telecom stocks or the second largest. What the company does offer investors as a differentiator from its peers is a highly defensive (and improving) business model, a juicy yield, and an intriguing growth strategy.
BCE’s network is the envy of the top telecom stocks. It’s also incredibly expensive to upgrade and maintain. As interest rates rose over the past few years, the cost of borrowing to sustain and upgrade that network also rose.
Eventually, this, along with other factors, led BCE to make deep cuts to its business. They included cuts to its media segment and slashing its dividend. BCE even sold off its MLSE stake, but not to pay down debt.
Instead, BCE used it to acquire U.S.-based Ziply Fiber. That deal allowed BCE to enter the competitive (and underserved) U.S. market – a market its peers do not operate in.
In the year since those cuts began, BCE’s business has improved substantially, while its stock price has remained largely flat.
Turning to income, BCE offers a tasty 5.4% yield, which is no longer growing annually, but still competitive.
Telus: The income-producer (but for how long)
Next up is Telus (TSX: T). Telus hasn’t struggled as much as BCE has in recent years. In fact, Telus has diversified significantly in recent years as it is investing heavily in growth.
Recently, the company announced a whopping $70 billion investment into its network and infrastructure over the next several years.
Additionally, Telus has entered into the digital services niche, offering solutions to specific corners of the market, such as agriculture and healthcare. That unit continues to grow, providing an increasing amount of revenue for the company.
Finally, we come to the quarterly dividend that Telus offers investors. As of the time of writing, that dividend works out to a completely insane 7.6%. Not only does this make Telus the best-paying of the three top telecom stocks in Canada, but it is also one of the best-paying dividend stocks on the market.
If that’s not appealing enough, there’s one final nugget for prospective investors to note. Telus has provided semi-annual increases to that quarterly dividend for over two decades without fail.
In other words, Telus excels as a buy-and-forget option for income-seeking investors.
Rogers: The boring, reliable pick?
Whereas BCE screams recovery and Telus screams income and growth, Rogers Communications (TSX: RCI.B) doesn’t scream at all.
BCE’s exit from MLSE resulted in Rogers becoming the majority shareholder. That sporting empire includes the Blue Jays, the aptly named Rogers Centre, and Sportsnet.
Suffice to say, that provides an additional, yet complementary source of revenue for the company. That revenue allows the company to invest in upgrading its own network and paying out a quarterly dividend.
That dividend currently works out to a 4% yield, which is lower than its peers. Rogers has also ceased the annual tradition of hiking its dividend, instead focusing on growth and debt reduction.
What top telecom stocks will you pick?
Despite their differences, Canada’s top telecom stocks are remarkably similar. That being said, they each cater to different investment objectives.
Investors who are seeking income generation with an understanding that dividend growth may slow should turn to Telus.
Investors with an appetite for risk, with a secondary desire for income, may want to consider looking closer at BCE.
Finally, those investors looking for a stable pick that runs firmly in the middle between risk and reward may want to consider Rogers.
Irrespective of which Telecom investors pick, a small position in any of the above stocks will be a great addition to any larger, well-diversified portfolio.
