Telus (TSX:T) and BCE (TSX:BCE) are popular stocks among yield-hungry Canadian investors. The former sports a girthy 10% dividend yield, a function of its $1.67 annual payout and $16.56 stock price. BCE for its part once had an even higher yield than Telus has now, though its yield has since shrank to 5.1% due to the dividend having been cut in half last year.
On the surface, Telus and BCE look like mighty appealing dividend plays. Telus has a bona-fide double-digit yield, while BCE has a respectable 5.1%. What more could a Canadian dividend investor want?
As it turns out, they could want a whole lot more!
A person stands in front of several doors representing different U.S. stock options for Canadian investors.
The trailing yield doesn’t count
An investor’s long-term dividend returns come not from the dividend today, but the dividend over his/her lifetime. If you buy a 10% yielding stock today and it cuts its dividend 90% tomorrow, congratulations – you’re now earning a princely 1% from dividends.
Scenarios like the one described above are real risks for both Telus and BCE. BCE has a history of dividend cuts, while Telus is running a 146% payout ratio based on last year’s earnings and today’s payout, putting it at risk of future cuts. Telus’ management recently said it would pause dividend increases going forward, language similar to what was seen from BCE before it slashed its payout in half.
Canadian telcos are struggling
Why is all this happening? Well, Canadian telcos are generally not very strong. They periodically assume enormous capital expenditure costs; they have little pricing power; and customers are cutting out TV service left and right. It’s not a great formula for business success. So, chasing Telus’s and BCE’s high yields probably isn’t a great investment strategy. There are however Canadian companies with relatively high yields, that should keep the payouts coming into the future. Below I’ll describe one that I’d buy in a heartbeat before even looking at Telus or BCE.
Brookfield Asset Management
Brookfield Asset Managment (TSX:BAM) is a Canadian alternative asset management company that manages funds for some of the world’s biggest institutions. The company invests funds for clients and collects management fees in exchange for managing clients’ money. It already has $1 trillion in assets under management, generating substantial fees. On top of that, the company has billions in committed but un-invested capital that it will put to work to generate fees.
According to Connect Money, BAM had $106 billion in dry powder in 2024. That was money investors had given it but hadn’t invested yet, which would start earning fees in the future. Since 2024, much of that money has been invested. However, we know from BAM’s most recent earnings release that the company still has plenty of dry powder available. From its second quarter earnings release, we can glean that:
- Brookfield Asset Management raised $21 billion in the first quarter.
- It raised $67 billion in 2026 year to date.
- Oaktree raised $13 billion.
- The company’s fee-related earnings increased 11%.
- It declared a US$0.50 dividend, or US$2.01 per year.
With a US$47.43 stock price, the dividend above gives us a 4.3% yield. And, unlike Telus and BCE, Brookfield Asset Management is actually growing.
So, do Telus and BCE have high yields? Sure, but with their barely-budging revenue, it’s hard to say if they will keep having high yields in the future. Brookfield Asset Management on the other hand is thriving. So, I’d much rather buy BAM’s 4.3% yield than Telus and BCE’s higher yields. The former company has better long-term prospects.
