BCE or Telus: Which TSX Dividend Stock Is a Better Buy Now?

Dividend stocks are an excellent way to build long-term wealth, offering investors the potential for both capital appreciation and a steady stream of dividend income. However, dividends are never guaranteed. That’s why it’s important to focus on companies with durable business models, reliable cash flows, consistent dividend payment histories, and solid long-term growth prospects. Reinvesting those dividends can further enhance total returns through compounding.

With that in mind, let’s compare BCE (TSX:BCE) and Telus (TSX:T) to determine which of these two Canadian telecom giants is the better investment today. Canada’s telecom sector has faced significant headwinds in recent years, including elevated capital spending, intense price competition, and regulatory pressures, all of which have weighed on profitability and share prices. Let’s begin by examining BCE’s financial position, growth outlook, and dividend track record.

BCE

Amid automation, remote work and learning, and the continued growth of e-commerce, demand for telecommunications services remains strong, creating a favourable backdrop for BCE. The company is expanding its 5G wireless and residential fibre networks across Canada and the United States while increasing its presence in AI-powered enterprise solutions. These initiatives could strengthen its competitive position and support long-term revenue and earnings growth.

BCE is also taking steps to improve its balance sheet. With $4.3 billion in liquidity at the end of the first quarter, the company is well-positioned to fund its growth initiatives while targeting a reduction in its net debt-to-EBITDA ratio from 3.8 to 3.5 times by the end of next year.

Last year, BCE reduced its quarterly dividend by approximately 56% to $0.44 per share, redirecting capital toward debt reduction and network expansion. Despite the cut, the telecom giant still offers an attractive dividend yield of 5.8%. As its growth investments begin to generate returns and its financial position improves, I expect BCE to maintain its dividend at a sustainable level.

Meanwhile, BCE’s shares have remained under pressure, falling more than 35% over the past three years. The sharp decline has brought its valuation to attractive levels, with the stock trading at an NTM (next 12 months) price-to-sales multiple of 1.1 and an NTM price-to-earnings multiple of 12.3. These discounted valuation metrics could provide long-term investors with an appealing entry point.

Telus

Telus currently connects 3.7 million premises through its fibre network, while its 5G network covers more than 90% of the Canadian population. The telecom company continues to expand and enhance its network infrastructure, with plans to invest $66 billion across Canada through 2030. These investments could expand its customer base, increase average revenue per user (ARPU), and support long-term revenue and earnings growth.

Beyond its core telecom business, Telus is strengthening its presence in AI-enabled services and expects revenue from this segment to grow from $800 million in 2025 to $2 billion by 2028, representing a compound annual growth rate of approximately 30%. Supported by these growth initiatives, management expects free cash flow to increase at an annualized rate of 10% through 2028, providing greater financial flexibility while supporting its deleveraging efforts and dividend sustainability.

Telus has also made meaningful progress in strengthening its balance sheet. At the end of the first quarter, its net debt-to-EBITDA ratio improved to 3.5 from 3.9 times a year earlier. Management expects this trend to continue, with the ratio declining to 3.3 times by the end of this year and 3 times by the end of next year.

Although the challenging operating environment prompted Telus to suspend its long-standing dividend growth program, the company continues to maintain its quarterly dividend of $0.42 per share, offering an attractive forward dividend yield of 11.4%.

Meanwhile, Telus shares have declined more than 24% over the past three years, leaving the stock trading at an attractive valuation. It currently trades at an NTM price-to-sales multiple of 1.1 and an NTM price-to-earnings multiple of 15.9, presenting a compelling opportunity for long-term income investors.

Investors’ takeaway

Intense competition in the Canadian telecom sector and elevated infrastructure spending have pressured earnings growth, raising questions about the sustainability of future dividends. Although both companies have taken steps to preserve financial flexibility, BCE reduced its dividend, whereas Telus maintained its quarterly payout while pausing dividend increases. Given its improving leverage, healthy prospects for free cash flow growth, and commitment to maintaining its current dividend, I believe Telus is the better investment at this stage.

The post BCE or Telus: Which TSX Dividend Stock Is a Better Buy Now? appeared first on The Motley Fool Canada.

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More reading

• Use a TFSA to Make $800 in Monthly Tax-Free Income
• 1 TSX Dividend Stock to Consider While It’s Down 50%
• All it Takes Is $3,000 in Telus to Generate Hundreds in Passive Income
• 2 Canadian Dividend Giants to Buy With Rates on Hold
• 1 TSX Dividend Stock to Consider While It’s Down 50%

Fool contributor Rajiv Nanjapla has no position in any of the stocks mentioned. The Motley Fool recommends TELUS. The Motley Fool has a disclosure policy.