There’s not much separating Canadian telecommunication stocks BCE (BCE Stock Quote, Chart, News TSX:BCE) and Telus (Telus Stock Quote, Chart, News TSX:T), according to Brian Madden of Goodreid Investment Council.
In fact, having one or the other in your income portfolio should be a given, since they’re about as recession-proof as they come.
“I think they're good stocks to weather a recession and slow recovery, if that's what unfolds,” said Madden, senior vice president at Goodreid, appearing on BNN Bloomberg Thursday.
“When we get into a more dynamically growing economic environment I think you might find there's better opportunities out there,” he said. “We don't own either of these stocks in our core Canadian equity portfolios but we do on both of them in an income-seeking mandate that we manage for an institutional investor, so I'm a bit torn as to whether to pick one or the other, because we like both of them for income.”
In addition to both holding sweet dividend yields (Telus is currently at 5.1 per cent and BCE’s is 5.8 per cent), the share prices for each have followed virtually identical paths over the past 12 months. Both stocks have stalled in their recovery of ground lost to the February and March market pullback but both had good stretches to end May and into the first week of June. Year-to-date, Telus is currently down 8.4 per cent while BCE is down 3.8 per cent.
But Madden says the current climate features plenty of more growth-oriented names at bargain prices, so Telus or Bell may not be your first choice on that front.
“I think a worthwhile question to ask when you're owning a telco is why do you own it. Is it for income or is it for growth?” Madden says.
“Because if it's for growth there are probably better opportunities out there but if it's for income these are about as good as it gets. The dividend is stable and secure and grows most years —maybe not necessarily this year, although I don't think that's off the table,” he said.
“And demand for their services, whether it's wireline or wireless, Internet media is pretty resilient to recession so these are good income plays right now. Probably if anything they're seeing a bit of a tailwind to demand,” Madden said.
“These things are indispensable. They're staples like Campbell's Soup has served that role in prior recessions,” he said.
After years and billions of dollars in the making, Canada’s Big Three telcos (including Rogers Communications) are launching their 5G networks this year, with Rogers having started out in a few select cities in January and BCE announcing this week its launch in Montreal, the GTA, Calgary, Edmonton and Vancouver.
Telus has yet to announce a launch date but both Telus and BCE said last week that they’d be going with companies other than Huawei Technologies for building out their 5G networks, a move that comes as governments worldwide —including Canada’s— debate the potential security risks attached to Huawei, suspected to be tied to the Chinese government. Rogers has chosen Sweden’s Ericsson as its 5G vendor while both Telus and BCE have now announced Ericsson and Finland’s Nokia.