The telecom sector in the world has changed a lot in the last two decades. The transition from landlines to mobile phones has been swift.
Now, it’s almost impossible for newer generations to conceive a time before they could get around without a smartphone connected to the internet.
In many ways, the telecom sector behaves like the utility sector, with a steady clientele, albeit with better growth opportunities (like 5G). And if you wish to invest in this steady yet growing market segment, consider the best telecom stocks in Canada.
Pros and Cons of Telecom Stocks In Canada
- Telecom businesses have a steady consumer base and income.
- The Canadian telecom market is highly consolidated (stable telecom stocks).
- Wireless technology is updated roughly every ten years (new growth opportunities).
- Many telecom stocks in Canada are stable dividend payers.
- Telecom services have become just as important as utilities.
- Shifting customer loyalties can cripple a telecom company.
- Deploying new technologies is cost-intensive, which affects a telecom company’s financials.
An Overview of Telecom Stocks In Canada
The telecom sector in Canada is highly consolidated. In the wireless communication and internet segments (the two most significant telecom segments right now), three large-cap companies control over 80% of the market.
This results in more stability for these companies, but the lack of competition and market disrupters means there are relatively fewer explosive growth opportunities.
Best Telecom Stocks In Canada
Most of the best telecom stocks in Canada trade on the TSX, but you can also find a few good picks from the venture capital market.
1. BCE Stock
- Ticker: BCE.TO
- Industry Niche: Wireless, wireline (internet, IPTV), Media
- Forward Dividend Yield: 5.82%
- Dividend Payout Ratio: 114.33%
- Dividend Yield (12-Month Trailing): 7.11%
- Upcoming Dividend Date: Jan 15, 2024
- Market Cap: $49.04 Billion
- Forward P/E Ratio: 16.54
BCE is one of the three telecom giants in Canada and the largest telecom company by market cap. It operates through three primary business segments, which are (in the order of the revenue they generate) wireline, wireless, and media.
The wireline segment includes the residential telephone service (a steadily declining business segment), internet, and TV. The wireless business segment includes mobile phone subscribers (over 9.4 million) and mobile-connected devices.
The Bell Media segment is more prominent as the self-proclaimed top content creator in the country and has ten powerful brands under this banner, including CTV and BNN Bloomberg.
BCE has a lot of growth opportunities, including more 5G subscribers and mobile-connected user-less devices, mainly Internet of Things (IoT) devices.
Historically, BCE has mostly been a modest grower but a decent dividend stock, especially compared to other telecom stocks. It’s a dividend aristocrat as well. It grew by over 133% between Aug 2009 and Aug 2016.
BCE has a lot of stability, and its media outlet is quite strong, but despite its size, it lags behind the other two giants in the wireless market segment, which is where most of the growth opportunities are.
2. Telus Stock
- Ticker: T.TO
- Industry Niche: Wireless, Health Services, Home Security
- Forward Dividend Yield: 4.50%
- Dividend Payout Ratio: 97.73%
- Dividend Yield (12-Month Trailing): 5.94%
- Upcoming Dividend Date: Jan 02, 2024
- Market Cap: $35.01 Billion
- Forward P/E Ratio: 21.87
Telus dominates the Western Canadian telecom market and has a sizeable consumer base – Over 9.2 million mobile phone users and 2.13 connected devices. It also has a decent number of TV and internet subscribers (the wireline segment).
Telus is also diversifying into other business segments, including virtual healthcare/telehealth services, which is expected to be a promising avenue as it becomes more mainstream in the future.
It also has intelligent home security and automation business segment with over 800,000 subscribers. It also offers IT services through its subsidiary.
This diversified business model is Telus’ main strength as many of these businesses are not as resource hungry, even when they are growing as the core telecom businesses are.
This might have been the reason behind Telus’ consistent growth in the decade between 2012 and 2022, which outshines the other two giants (in consistency, not in magnitude). In the decade between April 2012 and 2022, it grew its market value by about 124%.
It’s also a dividend aristocrat that offers a healthy dividend yield.
3. Rogers Communication Stock
- Ticker: RCI-B.TO
- Industry Niche: Wireless, Cable, Media
- Forward Dividend Yield: 3.54%
- Dividend Payout Ratio: 60.06%
- Dividend Yield (12-Month Trailing): 3.4%
- Upcoming Dividend Date: Jan 02, 2024
- Market Cap: $31.04 Billion
- Forward P/E Ratio: 11.69
Rogers Communication is the undisputed 5G king of Canada (2022), with the highest degree of market penetration and the most significant investment in the 5G infrastructure. It also has the most extensive wireless market share and caters to over 10.2 million mobile phone subscribers.
Rogers Wireless Segment comprises three brands – Rogers, Fido, and Chatr. Its cable footprint is also massive and the largest in four provinces: Ontario, New Brunswick, Nova Scotia, and Newfoundland. Its media market segment leans more towards sports, and the company also owns a baseball club.
The stock has been a shaky, inconsistent grower, and when it comes to overall returns from long-term holding of the stock, it’s in third place among the big three telecom companies.
And even though its dividends are just as healthy as the other two telecom giants, the yield is rarely on par with them. Its most impressive growth run in the last five years was between Sep 2020 and Apr 2022, when the stock rose by 44%.
4. Quebecor Stock
- Ticker: QBR-B.TO
- Industry Niche: Telecom, Sports, Media & Entertainment
- Forward Dividend Yield: 4.31%
- Dividend Payout Ratio: 46.37%
- Dividend Yield (12-Month Trailing): 3.99%
- Upcoming Dividend Date: Dec 19, 2023
- Market Cap: $7.14 Billion
- Forward P/E Ratio: 9.33
Quebecor is more of a media company than a telecom company, but the telecom segment of the business is still quite decent. Its telecom business is divided into five segments, including Videotron (a mobile network, among other things) and Fibrenoire, the fibre optic front of the company.
The Videotron network has over 1.6 million mobile subscribers. It’s also the most extensive media group in Quebec.
Quebecor is a community-driven, regional business, and even though it has a national presence, its revenues are concentrated in Quebec. This may prevent the business from expanding to other provinces, but it also results in a more stable consumer base.
It offers a powerful combination of long-term growth potential and healthy dividends (with a good yield). It rose well over 340% between Sep 2011 and Apr 2021.
5. Cogeco Communications Stock
- Ticker: CCA.TO
- Industry Niche: Broadband Services
- Forward Dividend Yield: 3.57%
- Dividend Payout Ratio: 31.13%
- Dividend Yield (12-Month Trailing): 5.99%
- Upcoming Dividend Date: Nov 29, 2023
- Market Cap: $2.31 Billion
- Forward P/E Ratio: 6.14
Cogeco Communications is a broadband company that operates in Canada and the US. Canada has a massive presence in Ontario and Quebec, and it’s the second largest cable operator in the two provinces.
Its US business is concentrated in 12 states. The regional business mix is relatively healthy, with both markets generating almost the same amount of income (though Canada usually has a slight edge). It operates in Canada under the name Cogeco Connexion and is connected to about 2 million homes.
The US business segment is Breezline, with a footprint of about 1.7 million homes.
Cogeco stock has been quite cyclical in nature, but the overall growth has been quite formidable, at least in the decade between Aug 2010 and Aug 2020, when the stock rose over 1,000%. That’s 100% growth a year. It also pays dividends at a decent yield.
6. Vecima Networks Stock
- Ticker: VCM.TO
- Industry Niche: Broadband Solutions (Hardware & Software)
- Forward Dividend Yield: 1.22%
- Dividend Payout Ratio: 75.86%
- Dividend Yield (12-Month Trailing): 1.3%
- Upcoming Dividend Date: Dec 18, 2023
- Market Cap: $425.34 Million
- Forward P/E Ratio: 10.54
Vecima Networks is not a telecom company like most others on this list but it’s part of the telecom sector. It offers hardware and software technology solutions for broadband.
Its three main business segments are network access, video streaming, and commercial video. The network access segment offers two major solutions, one of which is dedicated to providing healthy network access to rural communities.
The overall business orientation of Vecima is B2B. It caters to over 250 clients across the globe, including Shaw Communications from Canada. And the streaming capacity the company can facilitate through its infrastructure and existing technology is quite substantial.
It’s a decent growth stock, especially when the market conditions are right. It rose over 135% between Apr 2020 and Sep 2022. It also pays dividends, but the yield is rarely comparable to others on this list.
How To Pick The Best Telecom Stocks In Canada
Telecom stocks can be healthy long-term holdings. The services these companies offer to consumers are necessary for sustaining the modern lifestyle, which makes them an evergreen business.
And as the role of technology grows in our lives, these businesses will have more opportunities for growth, which may translate well for their investors.
When you are choosing the best telecom stocks in Canada to invest in, focus on:
- The overall returns (both dividends and capital appreciation potential).
- The payout ratio (to gauge the financial health of the dividends).
- Valuation compared to other telecom stocks. If it’s too different from its peers in either direction, consider investigating the stock more thoroughly.
- News regarding acquisitions and service outages (they can trigger extreme movements upward or downward).
How Many Telecom Companies Are There In Canada?
There are several telecom companies in Canada, but three of them control the majority of the market.
What is the Best Telecom Stock In Canada?
If you are planning on holding it long-term, Telus might be the best telecom stock in Canada.
Are Telecom Stocks Safe?
Telecom stocks are usually safe in Canada given the consistency of the earnings, especially the big three, but there are always market movements for every kind of stock, so beware of the risks.
The best telecom stocks in Canada offer a decent combination of dividend and capital appreciation-based returns, and stability, making them decent long-term holdings.
If you are a telecom stock that’s not one of the three largest companies in Canada, you may see better return potential but a relatively higher degree of risk as well.
If you are looking for dividend payers from sectors other than telecom, you may find a few good choices among the best Canadian dividend aristocrats.