Dividend Stocks: BCE (TSX:BCE) vs. Rogers Communications (TSX:RCI.B) vs. Telus (TSX:T)

BCE Inc.’s (TSX:BCE)(NYSE:BCE) dividend seems more stable than Rogers Communications Inc. (TSX:RCI.B)(NYSE:RCI) and Telus Corporation (TSX:T)(NYSE:TU).

Canada’s telecommunications sector is an oligopoly. Three major players dominate the market and extract tremendous profits from a user base that doesn’t seem to have many alternatives. These profits have been transferred to lucky shareholders in the form of high dividends over several decades.

However, which of these three dividends is the most robust or likely to grow in the long term? Dividend investors need to pay attention to the company’s growth prospects, reinvestment, and debt to figure out if the company can continue to deliver returns for the long term. Here’s a closer look at the underlying fundamentals powering these three impressive payouts.

Benchmark

The average dividend yield of the top three telecoms is 4.23%. The average return on assets and debt-to-equity ratio is 6.24% and 1.69, respectively. These averages offer a benchmark for the sector, which can help us compare all three of the top players.  

BCE (TSX:BCE)(NYSE:BCE)

BCE offers a 5.3% dividend yield, which is the highest of the group. Meanwhile, its debt-to-equity is the lowest of the three at just 1.34. As the country’s largest telecom, BCE’s economies of scale is being reflected on its balance sheet. However, the company hasn’t been complacent about its dominant position.

BCE has been deploying a tremendous amount of capital into expanding its fibre optic network for better coverage and adopting 5G technology earlier than most of its rivals. The scale of this reinvestment program makes it more likely that BCE can sustain its 5% compounded annual growth in dividends for the foreseeable future.

Telus (TSX:T)(NYSE:TU)

At its current market price, Telus offers a 4.42% dividend yield, placing it in the middle of the trio in terms of shareholder return. Similarly, the company’s debt is higher than BCE’s but lower than the other peer on this list.

However, Telus seems to be using its debt inefficiently. At 5.5%, its return on assets is the lowest of the three. This could be because the company’s business model is slightly differentiated by its healthcare investments in recent years.

Telus Health is a critical new venture that makes this company more than an average telecom. Management’s attempt at diversification is well justified, but shareholders may have to wait a while before this subsidiary starts making an impact on the bottom line.

Meanwhile, Telus’s investments in its wireless infrastructure are on par with BCE, which should put dividend-conscious investors at ease.

Rogers Communications (TSX:RCI.B)(NYSE:RCI)

Rogers has the lowest dividend yield (2.97%) and the highest debt burden ($2.6 in debt for every $1 in equity) of the three on this list.

Although it is the largest wireless service provider and a major cable provider in the country at the moment, fellow Fool contributor Daniel Da Costa believes this advantage is being rapidly eroded by BCE and Telus.

Bottom line

The combination of low yield, high debt, and increasing competition make Rogers the worst dividend stock on this list. Meanwhile, Telus is a good bet, but based on scale, capital expenditure, and track record, BCE seems to be the most reliable dividend stock in the telecom sector.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Vishesh Raisinghani has no position in any of the stocks mentioned.

More on Dividend Stocks

Canadian Dollars bills
Dividend Stocks

3 Monthly-Paying Dividend Stocks to Boost Your Passive Income

Given their healthy cash flows and high yields, these three monthly-paying dividend stocks could boost your passive income.

Read more »

Make a choice, path to success, sign
Dividend Stocks

The TFSA Blueprint to Generate $3,695.48 in Yearly Passive Income

The blueprint to generate yearly passive income in a TFSA is to maximize the contribution limits.

Read more »

hand stacks coins
Dividend Stocks

3 Ultra-High-Yield Dividend Stocks You Can Buy and Hold for a Decade

These three high-yield dividend stocks still have some work to do, but each are in steady areas that are only…

Read more »

senior man and woman stretch their legs on yoga mats outside
Dividend Stocks

TFSA: 2 Canadian Stocks to Buy and Hold Forever

Here are 2 TFSA-worthy Canadian stocks. Which one is a good buy for your TFSA today?

Read more »

calculate and analyze stock
Dividend Stocks

This 5.5% Dividend Stock Pays Cash Every Single Month!

This REIT may offer monthly dividends, but don't forget about the potential returns in the growth industry its involved with.

Read more »

Silver coins fall into a piggy bank.
Dividend Stocks

How to Use Your TFSA to Earn up to $6,000 Per Year in Tax-Free Passive Income

A high return doesn't mean you have to make a high investment -- or a risky one -- especially with…

Read more »

path road success business
Dividend Stocks

2 High-Yield Dividend Stocks to Buy Hand Over Fist and 1 to Avoid

High yields are great and all, but only if returns come with them. And while two of these might, another…

Read more »

Man holds Canadian dollars in differing amounts
Dividend Stocks

This 7% Dividend Stock Pays Cash Every Month

A high dividend yield isn't everything. But when it pays out each month and offers this stability, it's worth considering!

Read more »