Better Telecom Buy: Telus Stock or BCE?

Telus (TSX:T) and BCE Inc (TSX:BCE) are two of Canada’s favourite dividend stocks. Which is the better buy?

| More on:

Telus (TSX:T) and BCE Inc (TSX:BCE) are two of Canada’s favourite dividend stocks. They share many similarities. Indeed, they are basically the same type of business: providers of cellular, internet, and TV service to Canadians. Despite this obvious similarity, there are differences between the two companies as well. Notably, they have pursued very different strategies for diversifying their operations. Whereas BCE has branched out from telecommunications by getting into media proprietorship, Telus has opted to diversify into customer experience consulting. In this regard, Telus and BCE are worlds apart. In this article, I will explore Telus and BCE stock side by side, so you can decide which stock is best for your portfolio.

The case for Telus

A case can be made for picking Telus stock over BCE stock on the basis of growth. In the trailing 12-month period, Telus grew its revenue at 11.5%, while BCE grew at a mere 2.9%. The same trend holds over the last five-year period, a time period in which Telus’ revenue has grown at a 7.5% CAGR, while BCE’s revenue has only grown at a 1.13% CAGR. On the other hand, BCE has somewhat better growth in earnings and free cash flow, so this category isn’t exactly a slam-dunk victory for Telus.

The case for BCE Inc

A case for choosing BCE over Telus can be built on the former stock’s better valuation, dividend safety, and profitability.

BCE stock is generally cheaper than Telus stock. This point can be proven by looking at the chart below:

RatioTelusBCE
P/E2617
P/sales1.82
P/book2.82.9
P/cashflow8.56.5

Technically, this category is a draw, with Telus and BCE each scoring a few points. However, the P/E ratio is far more important than the price/sales ratio, so overall I’d call BCE stock cheaper than T stock.

It’s a similar story with profitability. BCE is far more profitable than Telus, with a 9.5% net margin to T’s 4.5% net margin. Likewise, BCE has the higher return on equity, 12.4% compared to Telus’ paltry 4.4%.

Finally, we have the dividend metrics. Here, BCE Inc has some impressive numbers, including a 7.16% yield, a three-year dividend growth streak, and 11.5% CAGR dividend growth over the last five years. Telus scores worse, with a 6.15% yield, a two-year growth streak, and 6.5% CAGR dividend growth over the last five years. Finally, BCE’s payout ratio, 120%, is lower than Telus’ 150% – with this metric, lower is better. So BCE has got Telus beaten on dividend safety and yield!

Foolish takeaway

Looking at all of the financial factors I’ve examined in this article, BCE Inc would appear to be a better dividend stock than Telus. It outscores Telus on every single metric I could find, and on top of that, it arguably has the edge over Telus in some unquantifiable “soft” factors, such as brand recognition. Pretty much everybody in Canada knows Bell, not everybody necessarily knows about Telus. So, BCE has more factors going for it than Telus does, without a doubt.

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 Andrew Button has no position in any of the stocks mentioned. The Motley Fool recommends TELUS. The Motley Fool has a disclosure policy.

More on Dividend Stocks

TFSA (Tax-Free Savings Account) on wooden blocks and Canadian one hundred dollar bills.
Dividend Stocks

Where to Invest Your $7,000 TFSA Contribution

The TFSA is attractive for investors who want to generate tax-free passive income.

Read more »

The TFSA is a powerful savings vehicle for Canadians who are saving for retirement.
Dividend Stocks

TFSA Investors: 3 Dividend Stocks Worth Holding Forever

These TSX stocks have the potential to grow their dividends over the next decade, making them top investments for TFSA…

Read more »

Tractor spraying a field of wheat
Dividend Stocks

Is Nutrien Stock a Buy for its Dividend Yield?

Nutrien is down more than 50% form the 2022 highs. Is NTR stock now oversold?

Read more »

golden sunset in crude oil refinery with pipeline system
Dividend Stocks

Best Stock to Buy Right Now: Enbridge vs TC Energy?

Enbridge and TC Energy rebounded nicely over the past year. Are more gains on the way?

Read more »

Electricity transmission towers with orange glowing wires against night sky
Dividend Stocks

2 Utility Stocks That Are Smart Buys for Canadians in November

Are you looking for some of the smart buys to consider in November? These utility stocks offer growth and a…

Read more »

View of high rise corporate buildings in the financial district of Toronto, Canada
Dividend Stocks

Is Power Corporation of Canada Stock a Buy for its 5% Dividend Yield?

Is Power Corporation of Canada (TSX:POW) stock's 5% dividend yield worth it? Discover why this resilient stock could be a…

Read more »

hand stacks coins
Dividend Stocks

Here Are My Top 3 Dividend Stocks to Buy Now

These three dividend stocks are ideal for strengthening your portfolio and earning a stable passive income.

Read more »

man touches brain to show a good idea
Dividend Stocks

3 No-Brainer REIT Stocks to Buy Right Now for Less Than $200

REITs have long been touted as some of the best dividend stocks out there if you want recurring, strong income.…

Read more »