The last word query on dividend shares within the telecom sector is BCE (TSX:BCE) or Telus Company (TSX:T)? Each are engaging as a result of they’ve a excessive dividend yield and provide a dividend reinvestment plan (DRIP). So, if I have been to calculate how a lot in dividends I’ll get on a $100 funding in Telus, BCE, or different telecom gamers, Telus and BCE provide the most effective payouts.
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Are BCE and Telus dividends protected?
Nevertheless, their dividends at the moment are in jeopardy. They’ve stopped rising dividends and are specializing in repairing their steadiness sheet. However as a shock flip of occasions, they introduced billions of {dollars} of funding in sovereign synthetic intelligence (AI) infrastructure. Does it make a great dividend investing case for high-leverage firms that have been chopping down on capital expenditure to instantly pump up capex to an all-time excessive?
BCE
BCE, in its first quarter earnings, revised its capital depth from 13.6% to twenty% after including $1.3 billion of capex for the Saskatchewan AI knowledge centre. This can be a important funding by an organization with $40.3 billion in debt sitting on its steadiness sheet, which is equal to three.8 instances its adjusted Earnings Earlier than Curiosity, Taxes, Depreciation, and Amortization (EBITDA).
The AI capex comes after BCE slashed its dividend by 56% because it was draining its free money circulate (FCF). The corporate was paying greater than 100% of its FCF in dividends. The dividend reduce decreased its payout ratio to 72% of FCF, and the corporate additionally altered its long-term payout goal to 40–55% of FCF.
With the AI infrastructure funding altering the corporate’s capital wants, the rising capex demand will scale back its FCF by 34%–28% in 2026. A decrease FCF will additional stress its dividends. I received’t be shocked if BCE brings extra long-term adjustments to its dividend coverage, comparable to suspending DRIP or pausing dividends altogether. Progress firms usually don’t pay dividends.
Telus
Telus is following BCE’s footsteps. It introduced a $66 billion funding in sovereign AI infrastructure in Could 2026, a whole reversal from February 2026, when it introduced plans to scale back capital expenditure by 10% and decrease web debt to three instances its adjusted EBITDA by 2028. Such large capex will want extra FCF diverted in direction of funding. Its present dividend payout ratio of 112% seems to be like a drag on the corporate’s AI enlargement plans.
The dividend case, which was robust for Telus till the beginning of Could, now appears to waver. You would anticipate some adjustments in dividend insurance policies within the coming months, a attainable dividend reduce, and a DRIP suspension. Nevertheless, that doesn’t imply Telus is just not a great inventory.
In truth, the shift of BCE and Telus in direction of AI infrastructure may transfer them from dividend shares to development shares.
Which TSX dividend inventory is a greater purchase now?
Between BCE and Telus, neither presents a compelling dividend funding. Nevertheless, a greater dividend inventory within the telecom house can be Rogers Communications (TSX:RCI.B) if market management and security are your precedence. After Shaw Communications’ acquisition, Rogers has been diligently fixing its steadiness sheet. The corporate elevated its FCF by 25% in 2025 and plans to scale back its capex by 30% to $2.6 billion in 2026.
The corporate nonetheless has a excessive web debt of three.8 instances its adjusted EBITDA, but it surely has been reducing it. Now for the spotlight, Rogers has a dividend payout ratio of 39%. It was by no means a great dividend development inventory, however a 39% payout ratio reveals that it will possibly maintain paying a $2 dividend per share yearly even in a pressured atmosphere. Additionally, it provides a DRIP and may take in the upper future dividend funds coming from the DRIP.
Rogers 3.9% dividend yield would possibly look unattractive in comparison with BCE’s 5% and Telus’s 9.7%, however it’s protected. The chance-reward ratio of BCE’s and Telus’s excessive yields not makes them interesting as a dividend inventory. Nevertheless, they current a great development alternative from AI investments.
