Rogers vs. Telus Corp: Which Stock Offers the Best Income Opportunity?

Telus Corporation (TSX:T)(NYSE:TU) and Rogers Communications Inc. (TSX:RCI-B)(NYSE:RCI) are the best dividend stocks to buy. Find out why.

| More on:

Canada’s telecom stocks have entered a little rough patch this year. After playing it safe for many years, the nation’s largest telecom companies are changing tactics and entering in a highly competitive landscape.

Rogers Communications Inc. (TSX:RCI.B)(NYSE:RCI), last month posted a disappointing third-quarter earnings report, which was mainly hurt by its shift to unlimited data pricing.

What worried investors after seeing Rogers’ earnings is that the financial impact of Rogers’ unlimited data wireless plans was much higher than anticipated. More than one million Canadians signed up under the new pricing model – three times what Rogers expected by this point.

After Rogers, Telus Corporation (TSX:T)(NYSE:TU) also disappointed investors when it releases its third-quarter earnings report last week. The company said that its third-quarter profit fell compared with a year ago because of higher technology investment costs, depreciation and amortization.

Net income declined 1.6% to $440 million for the three months to September 30 compared with $447 million over the same period in 2018, while basic earnings per share dropped 2.7% to $0.72 a share.

Telus, while in a direct competition with Rogers, also scrapped data overage fees, thereby depriving itself of one of the major revenue sources. Telus’ churn rate – the amount of customer turnover – increased slightly to 1.09% during the quarter and the company recorded 10,000 fewer new wireless customers at 193,000 compared to the year-ago period.

Rogers vs. Telus

The share price chart of these telecom players clearly shows that investors are punishing Rogers more than Telus in an environment that sees escalating competition eating into their margins. Telus stock is up 11% this year, while Rogers stock is down 9%. 

Despite this temporary setback, however, I find Rogers stock more attractively priced after this recent pullback and the long-term investors should take advantage of this weakness.

Trading at $63.65 at the time of writing, Rogers is offering a dividend yield of more than 3%, which is close to the highest in the past five years.

Although Rogers isn’t among the best dividend payers, the company is more geared towards growth, and has massively outperformed Telus when it comes to growth. 

That said, Telus is a great income stock and has many growth drivers that could keep its cash flow strong. In the latest results, Telus hiked its quarterly dividend to $0.5825 per share from $0.5625 a share and said it had returned $1.3 billion in dividends to shareholders so far this year.

“Telus has now returned more than $17 billion to shareholders, including over $12 billion in dividends, representing approximately $29 per share since 2004,” Darren Entwistle, President and CEO, said in a statement.

“Future dividend growth and affordability will also be supported by lower expected capital expenditures, in line with the preliminary guidance we are providing today for 2020 and 2021, and the resulting free cash flow expansion.”

Bottom line

Both Rogers and Telus stocks are solid income stocks, offering one of the best avenues for dividend investors to earn income. If I have to decide between the two, I would equally distribute my cash to get exposure to both opportunities.

As I emphasized in my earlier articles, these stocks aren’t a short-term bet. You should be prepared to hold these stocks for the next five to 10 years in order to make some handsome returns.

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 Haris Anwar has no position in the stocks mentioned in this article. Rogers Communications is a recommendation of Stock Advisor Canada. 

More on Dividend Stocks

coins jump into piggy bank
Dividend Stocks

The Smartest Dividend Stocks to Buy With $500 Right Now

These top dividend stocks both offer attractive yields and trade off their highs, making them two of the best to…

Read more »

Middle aged man drinks coffee
Dividend Stocks

Here’s the Average TFSA Balance at Age 35 in Canada

At age 35, it might not seem like you need to be thinking about your future cash flow. But ideally,…

Read more »

ETF stands for Exchange Traded Fund
Dividend Stocks

How to Invest Your $7,000 TFSA Contribution in 2024

Here's how I would prioritize a $7,000 TFSA contribution for growth and income.

Read more »

a man relaxes with his feet on a pile of books
Dividend Stocks

CPP Pensioners: Watch for These Important Updates

The CPP is an excellent tool for retirees, but be sure to stay on top of important updates like these.

Read more »

Technology
Dividend Stocks

TFSA Investors: 3 Dividend Stocks I’d Buy and Hold Forever

These TSX dividend stocks are likely to help TFSA investors earn steady and growing passive income for decades.

Read more »

four people hold happy emoji masks
Dividend Stocks

Love Dividend Growth? Check Out These 2 Income-Boosting Stocks

National Bank of Canada (TSX:NA) and another Canadian dividend-growth stock are looking like a bargain going into December 2024.

Read more »

An investor uses a tablet
Dividend Stocks

A Dividend Giant I’d Buy Over Enbridge Stock Right Now

Enbridge stock may seem like the best of the best in terms of dividends, but honestly this one is far…

Read more »

how to save money
Dividend Stocks

Got $1,000? The 3 Best Canadian Stocks to Buy Right Now

If you're looking for some cash flow from your $1,000 investment, these are the ideal investments to make.

Read more »