For a long time, Canada’s telecom sector was a favourite for dividend seekers. However, one regulatory change reshaped the industry and left companies like BCE (TSX: BCE) and Telus (TSX: T) with massive debt and lower returns on investment (ROI). Giving competitors access to the infrastructure that Telus and BCE built by spending billions of dollars created a negative incentive to invest in infrastructure. The impact of this was felt by investors as well, as both telecom giants paused dividend growth and BCE even slashed its dividend by 56%.
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The downside of BCE and Telus dividends
Before the regulatory change, BCE was growing dividends by 5% and Telus by 7%. The price war has changed their cash flow forever. Competitors did not spend billions building the infrastructure. Thus, they could offer internet at a lower rate. But BCE and Telus couldn’t afford a price war as they had taken on debt and needed a certain ROI from the infrastructure.
Today, they have paused dividend growth and are focusing on repaying debt by selling non-core assets. They have even altered their dividend policy to the new reality.
- BCE has reduced its dividend payout ratio to 40%–55% of free cash flow (FCF).
- Telus has maintained its dividend payout ratio of 60–75% of FCF, but is stepping down the discount on dividend reinvestment plan (DRIP) shares. Instead of issuing treasury shares with the DRIP money, it will buy shares from the open market and give them as DRIP shares.
All these efforts have made these dividend stocks, once lucrative for their high yield and dividend growth, less attractive. The only thing they offer that many other lucrative dividend stocks don’t is a DRIP.
BCE’s yield in 2026
While Telus is still attractive with a 9.4% annual dividend yield, BCE’s yield has reduced to 5% as the share price rallied on its AI investment. This lower yield reflects BCE’s strategic pivot toward growth sectors like AI and cybersecurity, but it also means dividend investors must reassess expectations.
A dividend stock better than Telus or BCE
In the current market, Power Corporation of Canada (TSX: POW) offers a stronger dividend growth story than BCE. Power Corporation recently announced its fourth-quarter earnings on March 19, wherein it announced a 9% increase in the 2026 dividend. Power Corporation’s annual dividend yield is 4% as its share price surged significantly in 2025.
To give you some background, Power is a financial holding company. Its portfolio comprises five large companies. Around 84% of its portfolio comprises IGM Financial and Great-West Lifeco, which distribute dividends, and 16% is invested in GBL, Sagard, and Power Sustainable, which provides capital appreciation.
In 2025, a lot of asset restructuring and profit booking helped it increase its net asset value to $85.77 as of December 31, 2025. However, the stock has slipped 7% as the Iran war has impacted several financial stocks.
Power Corporation may not be a good stock to buy for capital appreciation in the current market environment, but it is a good dividend stock. The company does not offer DRIP, but the dividend growth can help you fight inflation.
Investor takeaway
BCE and Telus stocks remain a solid hold for dividend investors who value DRIP and long‑term compounding. However, with dividend growth paused and yields reduced, investors may find Power Corporation more lucrative in 2026 than BCE. Balancing BCE for stability with other dividend growth stocks can help retirees and income seekers optimize returns.
