BCE (TSX: BCE) and Telus (TSX: T) have taken a beating in recent years. Contrarian investors are wondering if BCE stock or Telus stock is now oversold and good to buy for a self-directed Tax-Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP) portfolio focused on dividends.
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BCE
BCE trades near $35 per share at the time of writing, compared to more than $70 in April 2022. The stock was as low as $29 last year, around the time the board announced a major cut to the dividend.
Soaring interest rates in 2022 and 2023 drove up borrowing costs. A price war in the telecom sector, combined with the decline in new entrants to Canada, put additional pressure on the business. As such, the move to slash the distribution wasn’t a surprise. Bargain hunters have since drifted into BCE on the hopes that the worst is now over for the telecom giant.
BCE sold its stake in Maple Leaf Sports and Entertainment (MLSE) and used the proceeds to pay for its $5 billion acquisition of Ziply Fiber, an American provider of internet services. Analysts initially criticized the deal for being expensive and had preferred to see BCE use the money from the MLSE divestment to reduce debt. Sentiment around the Ziply acquisition has since improved.
BCE’s media group might also be on the mend. Management slashed costs in the division in the past two years to bring expenses more in line with the revenue situation. The bright light in the media group has been the Crave streaming service, which is getting a boost in subscriptions due to the worldwide success in recent months of the in-house Heated Rivalry series.
BCE is also investing in sovereign AI solutions targeted at Canadian government and corporate clients who want to ensure their data remains on Canadian soil. Management is targeting overall compound annual revenue growth of 2.5% to 4.5% through 2028. Investors who buy BCE stock at the current price can get a dividend yield of 5%.
Telus
Telus trades near $17.75 at the time of writing, compared to more than $30 at this time four years ago. The initial decline occurred largely for the same reasons BCE’s stock fell. High debt levels are common among the three largest Canadian telecom firms. The sharp jump in funding costs has had an impact on the entire sector.
Telus also ran into issues with its Telus Digital (Telus International) subsidiary that saw a significant decline in revenue. Management has since taken Telus Digital private and is looking for partners to monetize part or all of the Telus Health, Telus Agriculture, and Consumer Goods subsidiaries. In another move to shore up the balance sheet, Telus sold a 49.9% stake in its wireless tower assets.
Late last year, Telus announced it would pause future dividend increases, rather than announcing a dividend cut. The stock rose through January this year on investor hopes that the dividend might survive, but recently gave back most of those gains.
A new CEO, Victor Dodig, is taking over on July 1. Pundits speculate that the former CEO of CIBC will slash the dividend in a move to preserve cash flow and focus on debt reduction. Investors who buy Telus at the current price can get a dividend yield of 9.4%.
Despite the headwinds, Telus actually delivered decent 2025 results and made progress on its deleveraging process. Net debt to adjusted earnings before interest, taxes, depreciation, and amortization dropped to 3.4 times, with a goal of getting it down to three times by 2028.
Should you buy BCE or Telus now?
BCE already cut its dividend, so the current payout should be safe. Contrarian investors who are of the opinion that the new Telus CEO can turn things around without slashing the distribution, or will reduce the dividend by less than anticipated, might decide to make Telus the first pick. At the current share prices, I would probably split a new investment between the two stocks for a contrarian dividend portfolio.
