For dividend fans out there, the current slate of income stocks is becoming quite interesting, especially as market volatility looks to turn things up a few notches. Undoubtedly, the combination of lower interest rates and rising dividend stocks (especially in the financial sector) has made yields a bit less bountiful in the past 18 months. Still, if you’re willing to look at industries that are under pressure, there are still those fat yields to be had.
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Telus is a 9% yield heavyweight, but there are risks
Undoubtedly, shares of Telus (TSX:T) have been garnering considerable interest among passive income investors. It’s tough to ignore the elephant in the room that is Telus stock’s massive 9% yield. It might be a hefty commitment, but it does not seem to be at risk of an imminent cut, at least for now.
If things don’t turn around in 2026, perhaps the dividend could find itself skating on thin ice. But with dividend cut risk already priced in and no further growth in the payout, perhaps Telus stock is one of the few generational opportunities to lock in a sky-high yield alongside some recovery gains in the next three to five years.
Of course, bottom-fishing for deep value requires patience and a willingness to take some pain over the near term. While it’s too early to tell if Telus can keep its dividend going strong as headwinds prevail, I do think that balancing risks in a high-yield name with a lower-beta, dividend grower could make a lot of sense, especially in this climate.
Fortis stock is a lower-risk dividend growth star
While I do think Telus is a good stock to own, provided you can bear the risks (think of the downside scenario that sees Telus reduce its payout), I think balancing it with the likes of a safer dividend stock like Fortis (TSX:FTS) could be a smart move. Undoubtedly, Fortis stock stands out as more of a bond proxy than anything else, given the regulated nature of its electricity transmission assets.
As the firm continues to grow south of the border while also benefiting from the AI boom’s rising appetite for energy (the grid will surely be busy), I like the growth profile for Fortis. Of course, Fortis may not be a direct AI beneficiary, but it is in the background, ready to generate real cash flows as the boom works its way through the energy scene. Transmission and distribution of electricity may not be as growthy as energy production itself, but it’s an often overlooked, lower-risk way to profit from behind the scenes.
Either way, I think Fortis stock is a stellar dividend grower, especially as it moves ahead with its multi-year growth plans. The stock trades at 21.5 times trailing price-to-earnings (P/E), which is fair, and the 3.5% dividend yield, though historically small, is still quite bountiful when you consider the mix of low-risk growth potential you’ll get.
So, does FTS stock outshine Telus in the new year?
Personally, I think it’s a race that’s too close to call. Given the current set-up and the reasonable valuations, I think both companies can thrive in 2026. In my view, there’s no reason why both dividend payers can’t win big. So, if you’re looking to balance upside with lower risk (and volatility), I think Telus and Fortis are great buys together as a pair trade of sorts.
