Business Focus:

Telus (T): Specializes in providing telecommunications services and products, catering to wireless and wireline voice and data needs. Operates through two segments – wireless and wireline. The wireless segment focuses on mobile technologies, offering data and voice products. The wireline segment provides a range of solutions, including internet protocol, television, hosting, managed IT, cloud-based services, business process outsourcing, healthcare solutions, voice, and telecom services.

 BCE (BCE): Also known as Bell Canada Enterprises, BCE serves as a holding company for Bell Canada. It encompasses telecommunication providers and various mass media assets under Bell Media. BCE delivers a wide array of innovative products and services, leveraging world-class wireless and fiber networks. Services include mobile data and voice plans, Fibe internet and TV, wireless home internet, residential and business voice services, cloud-based services, mobile edge computing, and IoT.

Financial Performance:

Starting with dividend yield, we can see that BCE offers a slightly higher yield at 7.1% vs. T at a 6.1% yield. This slight edge in yield has been held by BCE over the past several years and for that reason, we feel that many income investors prefer BCE over T. Financial performance-wise, T has performed just slightly better than BCE over the past five years, providing a total return of 34% vs. BCE at 28%. Here, we give T the edge over BCE. Next up is valuation, we can see that BCE trades at a discount valuation relative to T, trading at a 17X forward earnings multiple vs. T at a 23X forward P/E. This discount valuation has been fairly persistent over the years, and for value investors, we believe BCE wins in this area.

Financial Metrics and Forward Estimates

In the below table we compare the financial metrics and stats between BCE and T. BCE is a larger company than T, but is expected to grow sales at a more modest pace next year. BCE has demonstrated a stronger margin profile than T, and for that reason, we feel it can be the ‘safer’ choice between the two. Both names have a similar debt/equity profile at 1.6, indicating a high debt profile on an absolute basis, but similar debt levels on a relative basis.

Investment Outlook:

Telus is considered to have potential for a better rebound in a recovery but is associated with higher risk. We perceive BCE as a safer overall choice, providing stability in a potentially volatile market. Both companies are expected to exhibit similar movements over an extended investment horizon. BCE offers a lower valuation with a higher dividend yield and a better margin profile than T, and for those reasons, we feel it is the more conservative option between the two.

In summary, while Telus may present opportunities for higher returns, BCE is seen as a safer and more stable choice, particularly in the current economic climate. Investors should consider their risk tolerance and investment objectives when choosing between these telecommunications giants.

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