BCE vs Telus: Which TSX Dividend Stock Is a Better Buy in 2026?

Investing in leading telecom stocks can give you exposure to a recession-proof sector. Typically, telecom stocks pay a high dividend, allowing you to generate a stable income stream throughout business cycles.

By 2025, Canadian telecom giants such as Telus (TSX:T) and B.C (TSX:BCE) have grossly underperformed the broader markets due to their weak balance sheets.

While BCE cut its annual dividend by 56% to $1.75 per share, Telus announced a pause in its dividend increase. As of January 2026, both Telus and BCE are down about 50% from their all-time highs.

While Telus offers investors a return of over 9%, BCE offers a lower return of 5.4%. So let’s take a look at which TSX dividend stocks are a better buy right now.

Should You Invest in BCE or Telus Stock Now?

BCE and Telus face similar challenges as they work to strengthen their balance sheets while meeting their dividend obligations. However, their strategic approach reveals crucial differences for investors considering Canadian telecom stocks in 2026.

BCE recently unveiled an ambitious three-year plan that targets sustainable free cash flow (FCF) growth of roughly 15% per year through 2028. It also forecasts revenue to grow between 2% and 4%, while adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) is expected to grow more than 2%.

The TSX telecom giant aims to generate $22 billion in cumulative free cash flow over the next three years, before capital expenditures. Additionally, it plans to pay out $5 billion in dividends to investors. BCE expects to reduce the net debt ratio to 3.5 times by the end of 2027 and move towards a ratio of three times by 2030.

Telus has also taken a conservative stance on dividends, pausing growth at the current quarter level of $0.4184 per share as the company works to improve its valuation.

Telus expects stronger FCF growth of more than 10% annually through 2028. Telus forecasts FCF of $2.15 billion in 2025 and $2.4 billion in 2026.

Telus announced it will scale back its dividend rebate reinvestment program, starting with a step back from 2% to 1.75% in early 2026, ultimately reaching a zero rebate in 2028.

Both companies are struggling with high debts. The net debt ratio for BCE is about 3.8 times, while Telus’s is lower at 3.5 times.

Is Telus stock currently undervalued?

BCE stock is priced at 8.9 times forward FCF, which is relatively cheap and below the 10-year average of 14 times. Given consensus price targets, BCE shares are trading at a discount of 13.5%. If we adjust the dividend, the cumulative return over the next twelve months could be closer to 19%.

Telus shares are priced at 12 times forward FCF, which is lower than the 10-year average of 21 times. Given consensus price targets, Telus shares are trading at a discount of 21.6%. If we adjust the dividend, the cumulative return over the next twelve months could be closer to 30%.

For income-oriented investors who prioritize the potential for dividend growth, BCE appears better positioned. However, investors comfortable with dividend stability and attracted to aggressive FCF growth might prefer Telus.