When it comes to finding high-quality dividend stocks to buy for passive income, reliable telecom stocks like Telus (TSX:T) and BCE (TSX:BCE) have been some of the most popular investments for years.
That’s not surprising. Telecom stocks have long been some of the best investments you can buy for income because they offer high yields, operate essential businesses, and have historically been seen as reliable long-term holdings.
However, over the last few years, the telecom sector has faced some significant headwinds.
Between higher interest rates, elevated debt levels, and increased competition, both BCE and Telus stocks have seen their share prices struggle and haven’t delivered the same level of consistency investors were used to.
Naturally, more investors are starting to look for alternatives.
With that said, though, it’s not easy to replace businesses that are this reliable and defensive. That’s what makes telecom so attractive in the first place.
However, if there’s one stock that offers a similar kind of essential, infrastructure-style cash flow, but with better long-term upside, there’s no question that Brookfield Infrastructure Partners (TSX:BIP.UN) is one of the best and most reliable dividend growth stocks to buy now.
Source: Getty Images
Why I’d pick Brookfield over BCE or Telus stock today
Although all three stocks are infrastructure businesses that generate a ton of cash flow and return much of it to shareholders, there are some key differences.
For example, the biggest differences between Brookfield Infrastructure and the telecom stocks are the scope of the business. While Telus and BCE operate large, capital-intensive networks, they’re primarily focused on one industry and one market.
Brookfield takes that same idea of essential infrastructure and applies it globally. It owns a diversified portfolio of assets across multiple sectors, including utilities, energy infrastructure, transportation networks, and data infrastructure.
That diversification makes a significant difference for investors because instead of relying on one industry or one region to drive performance, Brookfield generates cash flow from multiple sources across the global economy.
On top of that, the assets it owns are just as essential as telecom infrastructure. Whether it’s moving energy, transporting goods, transmitting electricity, or supporting data networks, these are services that businesses and consumers rely on every single day.
So, while all three stocks generate highly predictable cash flow, the majority of Brookfield’s business is backed by long-term contracts, regulated assets, and infrastructure that isn’t optional.
So, it offers many of the same defensive characteristics that investors are looking for in BCE or Telus stocks, but with significantly more diversification.
A better mix of income, growth, and long-term opportunity
In addition to its diversification, another reason why I’d buy Brookfield over Telus or BCE stock right now is its long-term growth potential from here.
Right now, one of the biggest challenges for stocks like BCE and Telus is that their free cash flow generation is under pressure. After years of heavy investments in 5G and fibre-to-the-home infrastructure, and now with continuously strong competition in the space, the outlook is getting more uncertain.
BCE has already cut its payout, and Telus has slowed its dividend growth and could potentially cut its dividend as it focuses on managing its balance sheet.
Brookfield, on the other hand, continues to grow. It offers a yield of more than 5%, and more importantly, it not only continues to increase its distribution each year, but it targets a 5% to 9% increase each year.
And much of the long-term growth potential Brookfield offers comes down to its strategy. Instead of just holding these reliable infrastructure businesses indefinitely, Brookfield actively recycles capital by selling mature assets and reinvesting in new opportunities with higher growth potential.
That’s why it continues growing both its cash flow and its distribution over the long haul.
So, while Telus and BCE can still play a role for income investors, Brookfield offers a better mix of reliable cash flow, long-term growth, and diversification, which is why it’s easily one of the best dividend growth stocks in Canada to buy today.
