Canada’s telecom stocks remain highly sought options for nearly any type of investor. On the surface, it makes perfect sense, as telecoms offer a stable business model that casts a wide moat around a large swath of the country. In some cases, that moat is even more lucrative thanks to the telecom owning a booming media empire that provides other revenue streams to investors.
Finally, I won’t even mention (at least yet) the handsome dividends on offer by the telecoms or the increasing need to have a large data allowance on your mobile device. In almost every sense, telecoms make excellent investment options, but which of Canada’s telecoms makes the absolute best investment?
Today let’s take a look at both BCE (TSX:BCE)(NYSE:BCE) and Shaw Communications (TSX:JR.B)(NYSE:SJR), two telecoms operating at different ends of the spectrum (pun intended) and both booming with opportunity.
Meet BCE: the large, legacy telecom
When most investors think of BCE, they first think of the company’s legacy wireline business, which was the bread and butter of the company for decades. What investors often overlook, however, is that the company also has a booming media segment, which includes radio and TV stations, as well as a stake in professional sports teams.
Then we come to BCE’s wireless segment. Wireless data connections have become the new must-have in our connected world, and telecoms are constantly trying to draw in more subscribers, and by extension, more revenue. BCE already has one of the largest networks in the country, with a subscriber base measured in the millions.
In terms of a dividend, BCE’s quarterly payout provides an appetizing 5.29% yield, and the company has been paying out that dividend for well over a century. If that weren’t enough to persuade an income-seeking investor to buy into BCE, then factor in the steady growth the stock has seen over the years, which handily makes BCE a great buy-and-forget favourite.
Shaw is the ultimate disruptor
Shaw is everything that BCE is not: Shaw has a smaller network size, lacks a media segment (more on that in a moment) and perhaps most important, has until the last few years when Freedom Mobile launched, lacked a wireless segment.
Freedom mobile came about from Shaw selling its media holdings to purchase and then expanding the former Wind network out to a larger audience, rebranded as Freedom Mobile.
By launching Freedom when Shaw did, the company began a masterstroke transformation that could not have been better executed. First, there was the acquisition of Wind’s assets, which gave Shaw a running start and some infrastructure, which would have been time-consuming and expensive to start from the ground up.
Then came the aggressive pricing points, generous data allowances and no-contract billing. These are things that customers have been waiting on for years, and Shaw not only delivered them, but thanks to its smaller network, was able to do so at a lower cost than its competitors.
Finally, Shaw hasn’t been sitting on its laurels. Indeed, the company emerged as one of the winners in the recent spectrum auction and is continuing to enhance and expand its wireless network, which has already attracted a growing number of subscribers in a relatively short period of time.
In addition to that emerging growth story, Shaw also offers a monthly dividend, which currently provides a respectable 4.37% yield.
Which is better for your portfolio?
The answer to that question really comes down to your portfolio objectives. Investors that are looking for an income-first option that going to provide a stable income with some growth are better suited to invest in BCE.
On the other hand, if you can tolerate some risk in exchange for what could be a decent amount of growth over the long term while still looking for income, Shaw could certainly prove an appealing choice.
