Better dividend stock in December: Telus or BCE?

If you’re looking for huge returns, you’ve probably been keeping a close eye on Canadian telecom companies in recent months. There is undoubtedly a lot of pressure on the sector, and the shares of the top players (the Big Three, as they are often called) are plummeting. And while there isn’t much to be excited about as telecom stocks enter another year with less hope in sight, I still think income investors may want to continue adding to their positions as the pain continues.

And yes, the pain for the telecom giants could continue for a while, despite recent efforts to turn the tide and improve the state of their balance sheets. B.C (TSX:BCE) wasted no time when it cut its dividend. And while I think the telecom titan can make up for this by raising the bar on its dividend more quickly once the worst of the headwinds pass and the focus is back on growth, investors should be cautious as the timeline is relatively unclear, especially as we enter a year where consumers aren’t exactly ready and willing to spend a lot of money.

It is becoming increasingly difficult to gain a large market share in the telecom world, and the price of entry remains as high as ever, while capital expenditure to upgrade the network remains high. Of course, lower interest rates could provide some relief, but with the Bank of Canada likely to pause on further rate cuts in the new year, those looking for a rate cut winner may be left a little disappointed, especially since recent action in telecom names could already indicate that such cuts are already priced in.

In any case, let’s take a closer look at the two names to see which telecom high-yield company is a better choice.

B.C

Right now, BCE appears to have the healthier, more sustainable dividend, currently yielding 5.45%. Of course, that’s because it was lowered earlier. And while many investors may not be fans of a company with a history of recent dividend cuts, I think things are slowly getting back on track.

It’s been another quiet year for BCE stock, with the name down just over 5% over the past year. But at the very least, the negative momentum is slowing, and that alone could be enough reason for dip buyers to build a position.

While mobile customer base growth is modest, the AI ​​division certainly stands out as a wildcard. Either way, cost cutting and perhaps more aggressive promotions could be the key to getting growth back on track. If BCE can achieve sufficient cost savings, it may be able to pass on more value to customers.

Telus

Telus (TSX:T) should be a more tempting buy, while its yield is around 9.6%. Of course, dividend growth will be at a standstill from now on, but that is not a problem, as the payout flirts with the 10% limit.

While analysts think the payout is hefty and will need to be cut at some point, I think the likelihood of such a cut is already baked in at $17 and change per share. While the price decline over the past year has been more vicious (-13%) than BCE stock, I continue to view the name as a high-risk, high-reward play that might pay off sooner or later. While Telus is a tougher path, I prefer it to BCE, mainly because of the likelihood of the dividend surviving this historically difficult period for the company.