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For a very long time, Canada’s telecom sector was a favorite for dividend seekers. Nevertheless, one regulatory change reshaped the business and left corporations like BCE (TSX:BCE) and Telus (TSX:T) with large debt and decrease returns on funding (ROI). Giving rivals entry to the infrastructure that Telus and BCE constructed by spending billions of {dollars} created a unfavorable incentive to spend money on infrastructure. The affect of this was felt by buyers as effectively, as each telecom giants paused dividend progress and BCE even slashed its dividend by 56%.

The draw back of BCE and Telus dividends

Earlier than the regulatory change, BCE was rising dividends by 5% and Telus by 7%. The worth battle has modified their money circulation without end. Opponents didn’t spend billions constructing the infrastructure. Thus, they may supply web at a decrease fee. However BCE and Telus couldn’t afford a value battle as they’d taken on debt and wanted a sure ROI from the infrastructure.

Right this moment, they’ve paused dividend progress and are specializing in repaying debt by promoting non-core belongings. They’ve even altered their dividend coverage to the brand new actuality.

• BCE has lowered its dividend payout ratio to 40%–55% of free money circulation (FCF).
• Telus has maintained its dividend payout ratio of 60–75% of FCF, however is stepping down the low cost on dividend reinvestment plan (DRIP) shares. As a substitute of issuing treasury shares with the DRIP cash, it is going to purchase shares from the open market and provides them as DRIP shares.

All these efforts have made these dividend shares, as soon as profitable for his or her excessive yield and dividend progress, much less engaging. The one factor they provide that many different profitable dividend shares don’t is a DRIP.

BCE’s yield in 2026

Whereas Telus continues to be engaging with a 9.4% annual dividend yield, BCE’s yield has lowered to five% because the share value rallied on its AI funding. This decrease yield displays BCE’s strategic pivot towards progress sectors like AI and cybersecurity, but it surely additionally means dividend buyers should reassess expectations.

A dividend inventory higher than Telus or BCE

Within the present market, Energy Company of Canada (TSX:POW) provides a stronger dividend progress story than BCE. Energy Company not too long ago introduced its fourth-quarter earnings on March 19, whereby it introduced a 9% improve within the 2026 dividend. Energy Company’s annual dividend yield is 4% as its share value surged considerably in 2025.

To provide you some background, Energy is a monetary holding firm. Its portfolio includes 5 giant corporations. Round 84% of its portfolio includes IGM Monetary and Nice-West Lifeco, which distribute dividends, and 16% is invested in GBL, Sagard, and Energy Sustainable, which offers capital appreciation.

In 2025, numerous asset restructuring and revenue reserving helped it improve its web asset worth to $85.77 as of December 31, 2025. Nevertheless, the inventory has slipped 7% because the Iran battle has impacted a number of monetary shares.

Energy Company will not be a very good inventory to purchase for capital appreciation within the present market atmosphere, however it’s a good dividend inventory. The corporate doesn’t supply DRIP, however the dividend progress may also help you battle inflation.

Investor takeaway

BCE and Telus shares stay a strong maintain for dividend buyers who worth DRIP and lengthy‑time period compounding. Nevertheless, with dividend progress paused and yields lowered, buyers could discover Energy Company extra profitable in 2026 than BCE. Balancing BCE for stability with different dividend progress shares may also help retirees and revenue seekers optimize returns.