The top Canadian telecoms have some pretty stunning dividend yields. Of course, Telus (TSX: T) stock has continued to steal the show for its massive dividend, now yielding just north of 10%. Indeed, that’s no typo, and while the dividend is about as safe as 10%-plus yields get, I do think that investors should take a bit of extra care when it comes to analyzing the safety of the payout and the next big move after the firm looks to move on past its dividend growth pause.
Indeed, the dividend seems likelier than not to stay intact for a while longer, but some sell-side analysts seem to have their doubts and, in my humble opinion, they’re right to err on the side of caution, especially since Telus stock is at risk of falling to new multi-year depths.
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It’s hard to bottom-fish in Telus and BCE
With shares going for $16 and change, and a haze of uncertainty continuing to cause some investors to head for the hills, I do think the fallen telecom is not without its fair share of risks, especially if the floor of support in the $16 range doesn’t hold up. With a new CFO brought aboard and big questions surrounding new AI efforts, I’d view Telus as more of a risk-on play than a name deeply-discounted and nearing a bottom.
Fellow telecom titan, BCE (TSX: BCE), has also been in a tough spot. The dividend got slashed, but still stands at a generous 5.1% at the time of this writing. With another wave of layoffs hitting the firm, affecting close to 700 workers, the big question is how the firm can turn the tide.
Could it be that the telecoms are more of an efficiency and automation story nowadays, as industry competition grows even fiercer? Possibly. Call it a race to the bottom, if you will, but I do think that Telus, even as shares become a falling knife again, might be the better bet, if not for the much-larger yield for the lack of a legacy media division.
Quebecor
When it comes to telecoms, I’d much rather be the disruptor than the disrupted. Quebecor (TSX: QBR.B) is a standout name in the space, actually up more than 134% in two years while BCE and Telus continue to fall. With the latest round of incredible quarterly numbers, it’s clear that the firm knows how to unlock the full potential of Freedom Mobile.
At 17.8 times trailing price-to-earnings (P/E), shares aren’t all that cheap and, for many, the 2.3% dividend yield is going to be a major deal-breaker. Why pay a premium for one of the lowest yields in the scene?
While I understand the subscriber growth narrative and the impressive management as a source of a premium, I do think that the ARPU (average revenue per user) could be the big catalyst that keeps the big wins coming for the $15.4 billion Quebec-based giant.
Though subscriber growth has slowed a bit in the latest quarter, I do think that the upselling opportunity could make Quebecor an aggressive dividend grower as it forces the likes of BCE and Telus to play defence in a consumer climate that’s becoming, in my view, even more value-oriented.
If you don’t mind the low dividend yield, I think it makes sense to go for growth, especially as Quebecor flexes its muscles in one of the toughest industries out there. In a race to the bottom, perhaps it’s the firm that’s set the floor (Quebecor’s Freedom Mobile) that can keep moving ahead at full speed!
