Investing in blue-chip telecom stocks allows you to gain exposure to a recession-resistant sector. Typically, telecom stocks pay a high dividend, enabling you to generate a steady income stream across business cycles.
However, in 2025, Canadian telecom giants such as Telus (TSX:T) and BCE (TSX:BCE) have grossly underperformed the broader markets due to their weak balance sheets.
While BCE slashed its annual dividend by 56% to $1.75 per share, Telus announced a pause on its dividend hike. In January 2026, both Telus and BCE are down roughly 50% from all-time highs.
While Telus offers investors a yield of over 9%, BCE provides a lower yield of 5.4%. So, let’s see which TSX dividend stock is a better buy right now.
Should you invest in BCE or Telus stock right now?
BCE and Telus are navigating similar challenges as they work to strengthen their balance sheets while maintaining dividend commitments. However, their strategic approaches reveal crucial differences for investors considering Canadian telecom stocks in 2026.
BCE recently unveiled an ambitious three-year plan targeting sustainable free cash flow (FCF) growth of roughly 15% annually through 2028. It also forecasts revenue to grow between 2% and 4% while adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) is projected to expand by more than 2%.
The TSX telecom giant aims to generate $22 billion in cumulative FCF before capital expenditures over the next three years. Additionally, it plans to distribute $5 billion in dividends to investors. BCE expects to reduce the net debt leverage ratio to 3.5 times by the end of 2027 and move toward a ratio of three times by 2030.
Telus has also taken a conservative stance on dividends, pausing growth at the current quarterly level of $0.4184 per share while the company works to improve its valuation.
Telus projects stronger FCF growth at over 10% annually through 2028. It has forecast FCF at $2.15 billion in 2025 and $2.4 billion in 2026.
Telus announced it will reduce the discount dividend-reinvestment program, beginning with a step down from 2% to 1.75% in early 2026, eventually reaching zero discount by 2028.
Both companies are wrestling with high debt levels. The net debt leverage ratio for BCE is around 3.8 times, while Telus’s is lower at 3.5 times.
Is Telus stock undervalued right now?
BCE stock is priced at 8.9 times forward FCF, which is relatively cheap and below its 10-year average of 14 times. Given consensus price targets, BCE stock trades at a 13.5% discount. If we adjust for its dividend, cumulative returns could be closer to 19% over the next 12 months.
Telus stock is priced at 12 times forward FCF, below its 10-year average of 21 times. Given consensus price targets, Telus stock trades at a 21.6% discount. If we adjust for its dividend, cumulative returns could be closer to 30% over the next 12 months.
For income-focused investors prioritizing dividend-growth potential, BCE appears better positioned. However, investors comfortable with dividend stability and attracted to aggressive FCF growth might prefer Telus.
