TFSA Income Investors: The Top Stock to Buy Amid the Telecom Tumble

Dividend investors should consider Shaw Communications Inc. (TSX:SJR.B)(NYSE:SJR) as their passive income stock of choice amidst the recent telecom stock sale.

| More on:

With the exception of BCE, telecom stocks have been tumbling of late, opening up a rare window of opportunity for risk-averse investors to lock-in a slightly higher dividend alongside a lower price of admission.

In this erratic market, dividends are in high demand as the competitive landscape of the Canadian telecom scene becomes that much fiercer, paving the way for a bit more volatility than most telecom investors are used to.

As Canada’s telecom scene continues to moves into the era of 5G and Fibre with four major players, the Big Three triopoly will become disrupted, and we could see significant winners and losers as the four telecom titans clash for the business of Canadians.

At this juncture, I like the number four up-and-coming sensation, Shaw Communications (TSX:SJR.B)(NYSE:SJR) the best.

When it comes to the Canadian wireless scene, Shaw is a disruptor with its carrier Freedom Mobile. While Freedom’s network quality and nationwide penetration pales in comparison to its Big Three peers, the upward trajectory remains.

Given Shaw’s relentless infrastructure investment and cost undercutting, I do see 5G as a fresh slate and a time where Freedom can aggressively poach subscribers of the Big Three.

Federal regulators are knocking down the hurdles by lowering switching costs for Canadians to get a better deal. NDP leader Jagmeet Singh has the Big Three telecoms in his crosshairs, noting that he believes that Canadians have been getting “ripped off” for telecom services like wireless.

In a prior piece, I highlighted the fact that Freedom was already again of the pack when it came to potential regulatory proceedings and that most hurdles would be placed in front of Shaw’s competitors to foster better rates for Canadian consumers.

We’re in the very early innings of the 5G arms race, but if I were to place a bet, I’d have to go with a player that’s going to be on the offensive. Shaw is going after its peers’ subscriber bases while its peers look to retain subscribers through various initiatives that’ll eat into margins.

Gone are the days of high capital gains and massive dividend growth — at least until Freedom becomes an equal player in the Big Four and another Nash equilibrium can be reached.

While it will take many years for Freedom to catch up to its bigger brothers, I’m enticed by the 4.6% dividend yield that’s generous enough for most investors to wait it out for the long run.

Stay hungry. Stay Foolish.

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 Joey Frenette owns shares of SHAW COMMUNICATIONS INC., CL.B, NV.

More on Dividend Stocks

Hand Protecting Senior Couple
Dividend Stocks

3 Blue-Chip Stocks So Safe Canadians Can Hold Them Until They Die

Canadian National Railway (TSX:CNR) is a stock worth owning for life.

Read more »

stock research, analyze data
Dividend Stocks

14.7% Dividend Yield? Buy Up This Passive-Income Stock in Bulk!

That dividend yield is high, but it still comes with some strong reasons to consider the stock outside of a…

Read more »

Canadian Dollars bills
Dividend Stocks

1 Dividend Stock That Could Create $5,000 in Tax-Free Passive Income in 10 Years

Here's why Fortis (TSX:FTS) certainly looks like a top dividend stock with outsized total return upside worth buying right now.

Read more »

ETF stands for Exchange Traded Fund
Dividend Stocks

The Best Canadian ETFs $100 Can Buy on the TSX Today

Dividend ETFs like BMO Canadian Dividend ETF (TSX:ZDV) can add passive income to your portfolio.

Read more »

space ship model takes off
Dividend Stocks

Is WSP Global Stock a Buy for its 0.6% Dividend Yield?

Here's why investors should look beyond WSP Global stock's tiny dividend yield.

Read more »

hand stacking money coins
Dividend Stocks

6 Percent Dividend Yield? I’m Buying This TSX Passive-Income Stock in Bulk!

Are you looking for a TSX passive-income titan? Here's one stock that pays handsomely that you will regret not buying…

Read more »

Dividend Stocks

Top Canadian Stocks to Buy Now and Hold for a Lifetime in a TFSA

If you want stability in your long-term TFSA, then these four are choices you can pick up again and again.

Read more »

RRSP Canadian Registered Retirement Savings Plan concept
Dividend Stocks

Here’s the Average RRSP Balance at Age 54 for Canadians

ETFs like the BMO Canadian Dividend ETF (TSX:ZDV) tend to be good RRSP holdings.

Read more »