The telecom stocks have taken a beating in recent years. And with few (or any) signs of relief, passive-income investors may be tempted to sell. It’s been such a painful, steady descent into the abyss for Canada’s top high-yielding telecoms. And there’s certainly a risk that BCE (TSX:BCE) or Telus (TSX:T) stock’s tumble could to even lower lows.
Indeed, things aren’t so much better for many of the yield-heavy telecoms south of the border. In fact, I’d argue that the dividend health of BCE and Telus is quite a bit better than some of the more troubled U.S. telecom firms. High rates have been a brutal headwind for quite some time now. If a recession hits and inflation goes nowhere, things could certainly worsen for Canada’s top telecom players.
I have no idea how bad a recession could be for Canada’s consumers. Regardless, I wouldn’t sleep on the top two Canadian telecoms today while their dividend yields are on the high side. Though risks may be perceived as elevated right now, given all the recession risk chatter, I’d argue the risks are actually a heck of a lot lower right now as the price of admission is close to the lowest it’s been in some time! Either way, BCE and Telus stock certainly look to sport a better risk/reward tradeoff than a year ago!
In this piece, we’ll check out BCE and Telus to see which dividend looks in better shape.
BCE
BCE stock enjoyed quite a nice pop off its recent $50 and change lows. Today, shares go for $53.60 alongside a 7.14% dividend yield. Indeed, the 7.4% rally off recent lows is encouraging. Though I’m unsure if this marks the bottom, I am encouraged by the recent round of earnings. Profits fell 8%, but revenue growth was still positive. Given the horrible macro headwinds, I’d argue the decent quarter deserved a round of applause from investors.
After recent cuts in the Bell Media division, I view the dividend as more than safe. Though its size may be a red flag for some investors. As for the dividend, I think it’s safe and sound, even if this good quarter is followed up by a few dreadful ones. In a high-rate world, a 7.4% yield isn’t all too absurd. In fact, I think BCE may be able to grow it again once headwinds pass, and it’s all about wireless growth.
Telus
Telus stock also enjoyed an upward spike of its own. I think it’s an encouraging sign that may very well represent a bottom. Profits may have taken a hit to the chin, but the firm is still growing its customer base.
At the end of the day, I believe that’s what matters for the long haul. In the meantime, the dividend is on some rock-solid footing. The yield sits at 6.23%, which is more than a percentage point lower than BCE.
I’m a bigger fan of Telus’s growth prospects, but I do acknowledge restructuring costs have been a sore spot for the firm. Either way, investors should look to the name if they seek a good balance of dividends and growth.
Safer dividend? They’re both more than safe
The dividends of BCE and Telus are both incredibly safe in my books, especially if the Canadian economy is in for a short contraction and an abrupt recovery. Further, BCE and Telus could keep adding to their customer bases. And with that, it will likely accompany climbing future cash flows. As such, investors should ask themselves what they value more: growth or a bit more yield.
