The Stock I’d Pick Over Telus or BCE and Why I Keep Coming Back to It

Canadian telecom giants like Telus and BCE have long been favourites among income investors because of their dependable dividends and stable businesses. But lately, both stocks have faced pressure from slowing earnings growth, rising competition, and heavy infrastructure spending.

TELUS recently reported a 12% year-over-year (YoY) drop in its adjusted earnings per share (EPS), while BCE’s adjusted EPS fell 8.7% from a year ago amid pricing pressure and rising investment costs.

That’s one of the main reasons why, instead of adding more telecom exposure to my portfolio, I keep coming back to Capital Power (TSX:CPX), a company with stronger earnings momentum and more diverse growth opportunities. Unlike the telecom giants, this Edmonton-based utility stock is benefiting from rising electricity demand and long-term energy infrastructure opportunities, while continuing to deliver strong cash flow growth and attractive shareholder returns.

In this article, I’ll explain why Capital Power is the dividend stock I’d personally pick over Telus or BCE right now.

A utility stock with strong momentum

To put it simply, Capital Power develops, owns, and operates utility-scale renewable and flexible power generation assets across Canada and the United States. Its portfolio includes natural gas generation facilities, renewable energy projects, and battery energy storage solutions spread across 32 facilities with nearly 12 gigawatts of generation capacity.

That diversified platform is continuing to help the company build stable and predictable cash flows while positioning it to benefit from growing electricity demand and long-term energy transition trends.

CPX stock hovered close to $64 per share at the time of writing, giving it a market cap of roughly $10 billion. Over the last year, the shares have climbed more than 20%, reflecting growing investor confidence in the company’s long-term strategy.

On top of that, Capital Power stock currently offers an attractive dividend yield of 4.3%, giving investors a dependable stream of passive income while they benefit from potential long-term capital appreciation.

Strong financial performance supports the story

In April, Capital Power delivered strong first-quarter financial results that highlighted the resilience of its business model. The company posted adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) of $404 million for the quarter, while its net cash flow from operating activities stood at $312 million. These numbers showed the company’s ability to generate dependable cash flow even in uncertain market environments.

One major contributor to Capital Power’s financial strength was the extension of the Arlington Valley summer tolling agreement in the United States. This deal added seven additional years of contracted revenue and is expected to contribute roughly US$70 million in incremental annual capacity payments by 2032 compared to 2025 levels.

The company’s focus on long-term contracts with reliable counterparties continues to give it downside protection while supporting stable earnings growth.

Why I keep coming back to Capital Power stock

For me, what really makes Capital Power stock attractive is its balanced approach to growth and risk management. Unlike many companies chasing aggressive expansion, this utility stock focuses heavily on disciplined capital allocation and long-term contracting. That strategy helps reduce volatility while still allowing the company to pursue attractive growth opportunities across natural gas, renewables, and energy storage.

The company also appears well-positioned to benefit from improving market conditions in key regions like Alberta and the PJM electricity market in the United States.

While telecom stocks like BCE and Telus still offer stability and income, Capital Power’s combination of reliable cash flow, growth potential, and exposure to evolving energy markets makes it a stock I find more compelling right now. That’s one of the main reasons I’d consider adding this stock to my portfolio soon.

The post The Stock I’d Pick Over Telus or BCE and Why I Keep Coming Back to It appeared first on The Motley Fool Canada.

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More reading

• 3 TSX Stocks to Buy During a Market Dip
• My Top Pick for Immediate Income: This 4% Dividend Stock
• The Canadian Dividend Stock I’d Turn to First When Markets Start Getting Difficult
• 3 Canadian Infrastructure Stocks Built for the Electrification Wave
• 3 Canadian Dividend Stocks Perfect for Retirees

Fool contributor Jitendra Parashar has positions in BCE. The Motley Fool recommends Capital Power and TELUS. The Motley Fool has a disclosure policy.