The year 2024 has been brutal for the telecom sector in Canada. Growing competition, regulatory challenges, and slow growth due to a saturated market (especially in established business segments) are taking their toll on the three telecom giants that rule the sector.
As a result, all three blue-chip stocks in the telecom sector in Canada are heavily discounted. But there are other factors to consider when making the safest, most promising choice among the three giants.
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The largest telecom company in Canada (by market cap)
BCE (TSX:BCE) is not just a leader by market valuation but also the largest telecom company in the country considering its consumer numbers – 24.7 million total consumer connections (as per 2023 annual report). The largest number of subscribers is naturally in mobile phones, but it also has a sizable slice of other markets, like the internet.
The stock has fallen almost 28% this year alone and over 47% from its five-year peak. The slump has pushed its yield unnaturally high, especially for an established dividend aristocrat.
The 10.3% yield should have made it the obvious choice, but unfortunately, the dividends are not as solid as they used to be. BCE’s financials are in question, and that undermines the dividends. Some analysts suggest that the price may drop further, making BCE an even less attractive choice.
The second-largest telecom company in Canada (by market cap)
Telus (TSX:T) is a giant in three provinces – British Columbia, Alberta, and Quebec. It’s also a giant in terms of total connections, including over 10 million mobile subscribers. One edge the company has over the other two telecom giants is that in addition to the conventional business segments, Telus also has a strong presence in security and telehealth.
It has over a million home security products/services subscribers. It’s also establishing a presence in the AI industry through its subsidiary.
The Telus stock is faring relatively better than BCE. It is trading at a 36% discount from its five-year peak and has slipped about 8% this year. Its dividend yield is also relatively high at 7.3%, but the dividends may be safer considering its financial state. T stock’s dividend growth streak is also longer compared to BCE’s. The current valuation is also comparatively healthy.
The largest 5G company in Canada
Rogers Communication (TSX:RCI.B) is arguably Canada’s best 5G stock, primarily thanks to its massive market penetration. The company has the most significant 5G network (by far) and serves customers in roughly 2,200 communities nationwide. Its wireless consumer count is also higher than that of the other two –11.6 million.
However, these strengths translate poorly into the stock’s performance and return potential. It has dropped almost 19% this year alone and still has a far lower yield than the other two (4%). The company doesn’t raise its dividends, but on the plus side, it has the healthiest payout ratio of the three.
Foolish takeaway
Telus is the obvious choice considering the yields, dividend history, sustainability, and past performance (before the current bearish trend). However, if there is even a mild chance that the company is slashing or suspending its payouts, Rogers might rise to the top pick.
