Beat the TSX With This Unstoppable Dividend Stock

Slow and steady wins the race. This stock beats the TSX with its steady dividend growth rate and price momentum.

| More on:

Are you looking for a dividend stock that can beat market returns while giving you regular passive income? There is a dividend aristocrat that has been beating the TSX for the last 10 years. In the TSX Composite Index weighted towards energy and bank stocks, a telecom stock outperformed with stable returns and regular dividend growth.  

The unstoppable dividend stock 

The stock is BCE (TSX:BCE), which enjoys the oligopoly nature of communication services where three players command 86% market share. The company has been paying regular quarterly dividends for more than four decades without any dividend cuts. 

When you look at the top dividend stocks, BCE might fall behind some energy stocks in terms of a higher compounded annual growth rate (CAGR), longer dividend history, and dividend yield. For instance, Enbridge stock has a five-year average dividend yield of 6.5% against BCE’s 5.5%. Moreover, Enbridge has had a 10% dividend CAGR for the last 28 years as against BCE’s 10% CAGR for 15 years. 

But times are changing. The communication industry is growing thanks to the digital revolution. The fifth-generation technology has set the stage for smart cities and autonomous cars, giving way to new growth opportunities. The energy industry is going through a transition to renewable energy. The oil and gas industry is at its peak. That explains why Enbridge’s dividend growth rate slowed to 3% in the last three years while BCE’s remained stable at 5%. 

The 5G revolution and proliferation of the Internet of Things (IoT) make BCE an unstoppable dividend stock for the next five-to-seven years. 

The dividend stock that beats the TSX 

BCE is also less volatile than the TSX Composite Index, with a five-year beta of 0.48. Beta is a measure of a stock’s volatility. The market beat is 1.0, so the 0.48 beta of BCE shows that the stock has a lower downside. Stocks with a low beta are attractive in a market downturn. 

Created with Highcharts 11.4.3Bce PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.ca

In the March 2020 pandemic downturn, the TSX Composite Index fell 33.6%, while BCE stock fell 19.6%. However, BCE stock underperformed (-9.6%) the TSX Composite Index (-8.66%) in 2022 as it suffered a fallback from the tech stock meltdown. This is even more reason to buy BCE stock as it is past the inflated price of the tech bubble. 

Irrespective of the stock price momentum, the show stopper is BCE’s 6% dividend yield and 5% dividend growth. This dividend growth helps BCE outperform the TSX in all market cycles. 

$1,000 InvestedTSX Composite IndexBCEOutperformance
5 Years$1,322.30$1,458.8010.3%
10 Years$1,637.00$1,967.1020.2%
BCE outperforms TSX Composite Index

BCE’s five-year outperformance against the TSX 

The last five years (April 2018–April 2023) have been pretty volatile for the TSX. The market witnessed the 2018 U.S.-China trade war, 2020 pandemic, 2021 tech and crypto bubble, 2022 bubble burst, and global energy crisis, and now the U.S. banking crisis. 

In these five years, the $1,000 invested in the TSX Composite Index is now $1,322, whereas the $1,000 invested in BCE is $1,458. BCE outperformed the TSX by 10.3% because the $305 accumulated dividend supported the $153.8 in capital appreciation. 

BCE’s 10-year outperformance against the TSX 

Given the macro events, the last five years might not be ideal for analyzing a stock’s performance. But BCE has outperformed the TSX in the last 10 years (April 2013 to April 2023). The 2013–2018 period saw the 2016 oil crisis, which pulled the TSX down 17% in 2016. 

An investment of $1,000 in the TSX Composite Index in April 2013 is now $1,637, and in BCE is $1,967. BCE outperformed the TSX by 20.2% because of the $623.7 accumulated dividend and $343 capital appreciation.

BCE maintained its dividend growth even during its three-year (2020-2022) accelerated capital spending program to roll out fibre and 5G networks. Now, it is reaping the benefit of its 5G rollout and expects 2023 free cash flow to increase by 2–10%, giving it liquidity to maintain incremental dividends. 

Should you invest $1,000 in Enbridge right now?

Before you buy stock in Enbridge, consider this:

The Motley Fool Stock Advisor Canada analyst team just identified what they believe are the Top Stocks for 2025 and Beyond for investors to buy now… and Enbridge wasn’t one of them. The Top Stocks that made the cut could potentially produce monster returns in the coming years.

Consider MercadoLibre, which we first recommended on January 8, 2014 ... if you invested $1,000 in the “eBay of Latin America” at the time of our recommendation, you’d have $21,345.77!*

Stock Advisor Canada provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month – one from Canada and one from the U.S. The Stock Advisor Canada service has outperformed the return of S&P/TSX Composite Index by 24 percentage points since 2013*.

See the Top Stocks * Returns as of 4/21/25

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 Puja Tayal has no position in any of the stocks mentioned. The Motley Fool recommends Enbridge. The Motley Fool has a disclosure policy.

More on Dividend Stocks

a sign flashes global stock data
Dividend Stocks

Where I’d Invest $8,000 In the TSX Today

There's no shortage of great stocks on the TSX today. Here's a look at three options to consider adding to…

Read more »

Two seniors float in a pool.
Dividend Stocks

How I’d Turn $7,000 Into a Growing Income Stream for Retirement

Investors looking for a growing income stream for retirement will find these stocks must-buy options right now.

Read more »

Tractor spraying a field of wheat
Dividend Stocks

Top 2 Canadian Stocks to Buy for Long-Term Gains

Sometimes investors worry too much about the near term, which is what makes these two top value options.

Read more »

ETF stands for Exchange Traded Fund
Dividend Stocks

How I’d Build a Monthly Dividend Portfolio With $7,000

Investors can start building a monthly dividend portfolio through dividend ETFs that pay out monthly.

Read more »

a person watches a downward arrow crash through the floor
Dividend Stocks

Is This Correction Your Chance? Buy Up These 4 Dividend Stocks on Sale

These four dividend stocks aren't only top choices for yield, but for safety as well.

Read more »

ways to boost income
Dividend Stocks

1 Dividend Stock Down 34% From 52-Week Highs to Buy for Lifetime Income

This dividend stock is likely to just do even better, especially amidst copper prices.

Read more »

Man data analyze
Dividend Stocks

1 Magnificent Consumer Stock Down 17% to Buy and Hold Forever

Alimentation Couche-Tard (TSX:ATD) stock might be one of the best bargains available on the stock market for long-term investors right…

Read more »

data analyze research
Dividend Stocks

This 6% Dividend Stock Hasn’t Missed a Payment in 3 Decades

This TSX stock has a solid track record of dividend payments and growth. Moreover, it offers a sustainable yield of…

Read more »