BCE or Telus: Which TSX Dividend Stock Is a Better Buy Now?

Discover how BCE and Telus are redefining dividend investing amid challenges. Analyze their latest moves and investment returns.

Puja Tayal

Author Bio

Puja Tayal grew up in a small-business family where dinner conversations often centred on working capital and savings. Her early experiences with investing, particularly during the 2008 financial crisis, shaped her approach to understanding markets and evaluating investment opportunities. She began her career at a mutual fund company before moving into investor education and financial writing for asset and wealth management firms. Before joining The Motley Fool, Puja wrote for Market Realist, where she extensively covered the semiconductor industry. Her published work has also appeared in The Indian Express. Puja believes every stock has a story that can help investors understand its potential returns. She combines business analysis with different investing approaches to help investors make informed decisions and align their portfolios with their long-term financial goals. Outside of finance, Puja enjoys long drives, catching up with friends, watching superhero and science-fiction movies, and managing her family portfolio. She also has a keen interest in artificial intelligence and its potential to reshape the world.

Education

Bachelor's degree in Accounting and Finance, University of Mumbai (2007)
CFA Level I

Areas of Expertise

Qualitative company analysis, management strategy, risk assessment, long-term investing, portfolio diversification and rebalancing, dividend reinvestment, cyclical growth opportunities, compounding strategies, growth stocks, and dividend stocks.

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Favorite Investment Quote

"Risk comes from not knowing what you're doing." — Warren Buffett

Published May 28, 11:45 am EDT

The ultimate question on dividend stocks in the telecom sector is BCE (TSX: BCE) or Telus Corporation (TSX: T)? Both are enticing because they have a high dividend yield and offer a dividend reinvestment plan (DRIP). So, if I were to calculate how much in dividends I will get on a $100 investment in Telus, BCE, or other telecom players, Telus and BCE offer the best payouts.

man looks worried about something on his phone — Source: Getty Images

Are BCE and Telus dividends safe?

However, their dividends are now in jeopardy. They have stopped growing dividends and are focusing on repairing their balance sheet. But as a surprise turn of events, they announced billions of dollars of investment in sovereign artificial intelligence (AI) infrastructure. Does it make a good dividend investing case for high-leverage companies that were cutting down on capital expenditure to suddenly pump up capex to an all-time high?

BCE

BCE, in its first quarter earnings, revised its capital intensity from 13.6% to 20% after adding $1.3 billion of capex for the Saskatchewan AI data centre. This is a significant investment by a company with $40.3 billion in debt sitting on its balance sheet, which is equivalent to 3.8 times its adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA).

The AI capex comes after BCE slashed its dividend by 56% as it was draining its free cash flow (FCF). The company was paying more than 100% of its FCF in dividends. The dividend cut reduced its payout ratio to 72% of FCF, and the company also altered its long-term payout target to 40–55% of FCF.

With the AI infrastructure investment altering the company’s capital needs, the growing capex demand will reduce its FCF by 34%–28% in 2026. A lower FCF will further stress its dividends. I won’t be surprised if BCE brings more long-term changes to its dividend policy, such as suspending DRIP or pausing dividends altogether. Growth companies generally don’t pay dividends.

Telus

Telus is following BCE’s footsteps. It announced a $66 billion investment in sovereign AI infrastructure in May 2026, a complete reversal from February 2026, when it announced plans to reduce capital expenditure by 10% and lower net debt to 3 times its adjusted EBITDA by 2028. Such massive capex will need more FCF diverted towards investment. Its current dividend payout ratio of 112% looks like a drag on the company’s AI expansion plans.

The dividend case, which was strong for Telus until the start of May, now seems to waver. You could expect some changes in dividend policies in the coming months, a possible dividend cut, and a DRIP suspension. However, that doesn’t mean Telus is not a good stock.

In fact, the shift of BCE and Telus towards AI infrastructure could move them from dividend stocks to growth stocks.

Which TSX dividend stock is a better buy now?

Between BCE and Telus, neither presents a compelling dividend investment. However, a better dividend stock in the telecom space would be Rogers Communications (TSX: RCI.B) if market leadership and safety are your priority. After Shaw Communications’ acquisition, Rogers has been diligently fixing its balance sheet. The company increased its FCF by 25% in 2025 and plans to reduce its capex by 30% to $2.6 billion in 2026.

The company still has a high net debt of 3.8 times its adjusted EBITDA, but it has been lowering it. Now for the highlight, Rogers has a dividend payout ratio of 39%. It was never a good dividend growth stock, but a 39% payout ratio shows that it can keep paying a $2 dividend per share annually even in a stressed environment. Also, it offers a DRIP and can absorb the higher future dividend payments coming from the DRIP.

Rogers 3.9% dividend yield might look unattractive compared to BCE’s 5% and Telus’s 9.7%, but it is safe. The risk-reward ratio of BCE’s and Telus’s high yields no longer makes them appealing as a dividend stock. However, they present a good growth opportunity from AI investments.