As Canadian investors consider allocating a portion of their Tax-Free Savings Account (TFSA) contribution limit, perhaps $3,500 of the $7,000, to a resilient, passive-income-generating stock, the telecommunications sector warrants serious consideration. Industry giants BCE, Rogers Communications, and TELUS (TSX:T) dominate this essential services industry. These companies offer the potential for stable dividends, recession-resistant revenue, and exposure to long-term infrastructure trends like 5G and fibre broadband. While all three leading Canadian telecom stocks have their merits, TELUS stock stands out as a top pick for 2025. Here’s why.
On May 8, 2025, BCE announced a significant cut to its annualized dividend by nearly 44%, reducing it to $1.75. This change brings its dividend yield down from approximately 13.6% to about 6% annually. Consequently, this telecom stock might not be the most prudent investment currently, as it could experience further turbulence and volatility while investors adjust their portfolios to this new fundamental information.
With BCE stock potentially losing its esteemed position among the S&P/TSX Dividend Aristocrats Index due to this dividend cut, Rogers and TELUS emerge as strong contenders for inclusion in a TFSA focused on steady, passive income generation.
But Rogers isn’t raising its quarterly dividends yet.
TELUS stock: A top choice for TFSA growth and passive income
TELUS stock presents a uniquely balanced opportunity for TFSA investors in May 2025 due to its reliably diversified cash flow, consistently growing dividends, and a best-in-class yield.
Currently, TELUS’s dividend yields over 7.7% annually. This is more than 170 basis points higher than BCE’s new dividend yield and 200 basis points above Rogers’ current dividend yield of 5.7% (as of May 8, 2025). For a new TFSA investment targeting a Canadian telecom stock, Telus stock offers a clear upfront yield advantage, translating to better potential passive income.
TELUS stock’s dividend growth consistency is a key differentiator. A dividend stock that consistently increases its payouts is generally more attractive than its peers that do not. This is because its yield on a cost basis will likely grow with inflation, helping to cushion investors’ purchasing power. TELUS is the sole large-cap dividend growth stock in the Canadian telecom sector today. It faces no further competition in this regard after BCE discontinued its 16-year streak of consecutive dividend increases in 2025. In November, Telus raised its dividends by 3.3% for 2025, marking its 21st consecutive year of dividend growth.
The telecom giant’s dividend was well covered in 2024 with an 81% payout rate of free cash flow – a rare feat in an industry that has struggled to maintain dividend health lately.
Diversification for sustainable growth
Most notably, TELUS boasts a widely diversified business. It leverages resilient telecommunications cash flow to invest in burgeoning innovative segments, including health insurance, agricultural data and analytics, and technology through TELUS International. TELUS has demonstrated a sustained focus on adopting artificial intelligence (AI), a sector currently in a growth phase.
Meanwhile, peers like BCE and Rogers are grappling with the challenge of revitalizing mature and potentially struggling media businesses. While the outcome of these differing strategies remains to be seen, TELUS’s technology ventures could reignite growth-oriented investors’ optimism in an increasingly competitive Canadian telecom sector.
TFSA accounts provide the optimal tax shelter for investment returns. Given that all three TSX-listed telecom stocks offer substantial dividend yields for passive income, the tax efficiency within a TFSA can be particularly advantageous compared to dividend tax credits available elsewhere.
Furthermore, telecom stocks are ideally suited for TFSAs due to their reliable cash flows. Canadians rarely discontinue their phone or internet services, even during economic downturns or trade wars, ensuring a steady revenue stream for providers. The sector also benefits from high barriers to entry, with billions of dollars invested in licenses and networks that are difficult for competitors to easily replicate.
Investor takeaway
TELUS stock looks more attractive than telecom industry peers to investors seeking a blend of stable passive income and growth potential within their TFSA accounts. Its consistent dividend growth, higher yield compared to peers after BCE’s recent cut, and strategic investments in innovative sectors position it as a smart choice in the Canadian telecom landscape for long-term, tax-efficient wealth building.