BCE or TELUS: Which TSX Dividend Stock Is a Better Buy in 2026?

BCE (TSX:BCE) and TELUS (TSX:T) were the best stocks to buy for passive income for some decades. They offered steady, juicy dividend yields, until elevated interest rates, disruptive aggressive price wars, and regulatory changes shifted the Canadian telecommunications sector’s investment landscape. Following BCE stock’s dividend cut in 2025, and TELUS stock’s suspended dividend growth plan during the past year, investors in 2026 look beyond the dividend yields

Both BCE and TELUS are navigating restructuring years, and their recovery paths may diverge. Let’s see which of the two TSX dividend stocks could be a better buy for total returns this year.

BCE vs. TELUS: An upfront yield reality check

The most striking difference between TELUS and BCE stock today is the massive yield gap. Following BCE’s massive 56% dividend cut in mid-2025, it is no longer the yield king.

Metric (Feb 9, 2026)BCE (BCE)TELUS (T)Current Yield5%8.6%Annual Dividend$1.75$1.67Dividend StatusRebased in 2025. Flat for 2026.Growth on hold.FCF Guidance4%–10% Growth>10% GrowthFCF Payout Rate (2026 Estimate)47% –50%75%Net Debt/Adj EBITDA (leverage).3.83.4BCE stock vs. TELUS stock: Dividend safety for 2026

While TELUS stock offers an upfront yield advantage over BCE for 2026, with a dividend yield towering above 8.6%, BCE stock’s 5% dividend is well covered by distributable cash flow given a 50% payout rate for 2026.

Although BCE still employs higher leverage in 2026, with a leverage ratio near 3.8, the company’s dividend reset gave it breathing room going forward. It’s paying out just half of its cash flow to shareholders in dividends and has more capacity to pay down debt faster.

Should BCE beat TELUS to the deleveraging race this year, BCE stock price could rebound to generate positive capital gains for investors. Positive capital gains and a 5% dividend yield may combine to match or exceed TELUS stock’s total returns for this year.

However, stock prices usually take random walks, and if your confidence in BCE stock’s potential capital gains in 2026 is low, TELUS’s dividend yield offers superior “certainty” as a direct cash return for the year.

Moreover, if you intend to hold the TSX dividend stocks for the next decade, and never sell, TELUS’s dividend yield could more than double your capital in just over eight years, the Rule of 72 “assures” investors.

BCE’s chances to outperform TELUS in 2026

BCE took its medicine in 2025. By slashing its dividend and acquiring Ziply Fiber in the U.S., management has pivoted toward a lower-payout, higher-growth model. With a low free cash flow payout rate, the BCE dividend is arguably the safest it has been in a decade. Management may comfortably bet on its U.S. growth strategy and artificial intelligence-powered enterprise solutions (which grew revenue by 60% in 2025) to drive the next leg of revenue and cash flow growth.

That said, given management’s latest guidance for a 5%–11% drop in earnings in 2026 as the company integrates acquisitions and battles a slowing Canadian wireless and advertising market, lower profitability may significantly test the market’s confidence and valuation for BCE stock, lowering the share price further.

TELUS stock: An efficiency play

While BCE slashed dividends and “starved” income investors in 2025, TELUS chose a different strategic path. Instead of a dividend cut, management opted for a dividend freeze while deleveraging and growing free cash flow through non-core asset sales.

TELUS offers a massive yield advantage today, and its health and artificial intelligence (AI) business segments remain high-potential growth drivers with potential for successful spinoffs.

That said, TELUS’s 8.6% yield signals market skepticism. If free cash flow (FCF) doesn’t hit 2026 targets, the dividend freeze could eventually turn into a painful cut.

Investor takeaway

So which Canadian telecom stock is the better buy for 2026? BCE stock could do well for conservative investors after its dividend reset frees up cash flow to allow management to repair its balance sheet. Meanwhile, TELUS could be a rewarding high-yield dividend play for opportunistic income. If you believe TELUS can hit its 2027 leverage targets without a dividend cut, you may lock in a generational yield with significant capital upside.

The post BCE or TELUS: Which TSX Dividend Stock Is a Better Buy in 2026? appeared first on The Motley Fool Canada.

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More reading

• Transform Your TFSA Into a Cash-Generating Machine With $10,000
• 8.6% Yield? Here’s the Dividend Trap to Avoid in February
• 3 Dividend Stocks to Double Up on Right Now
• Beyond Telus: A High-Yield Stock Perfect for Income Lovers
• Don’t Buy BCE Stock Until This Happens

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