BCE (TSX:BCE) and Rogers Communications (TSX:RCI.B) are two titans of Canada's telecom industry. Both offering intriguing opportunities for investors, depending on their priorities. Deciding which is the better buy requires a deep dive into recent earnings, dividend reliability, debt burdens, and the broader market landscape. Each company presents a unique value proposition, but also its share of risks.

Recent earnings

BCE stock recently reported net income of $604 million for the third quarter of 2024, a remarkable 52.1% jump from the same period last year. Despite this, revenue fell by 1.8% year-over-year to $5.97 billion, reflecting challenges in maintaining growth amid a competitive market. While BCE stock's cost-cutting initiatives have helped shore up profitability, the drop in revenue signals that the company faces hurdles in driving consistent top-line expansion. This duality of improving earnings but weakening revenue presents a mixed outlook for potential investors.

Rogers, meanwhile, added 101,000 postpaid wireless subscribers in its latest quarter but fell short of analysts' expectations of 129,040. Even so, the company reported adjusted earnings per share of $1.42, beating estimates of $1.35. Its media segment was a standout, with revenue climbing 11% due to strong demand for sports-related content. This diversification into media has proven to be a smart strategic move. Yet, Rogers' relatively modest revenue increase of 0.7% year-over-year indicates some of the same challenges facing the sector as a whole.

Fundamentals

Dividends are a major factor for investors in these established companies. BCE stock boasts an eye-popping yield of 10.8%, which is undoubtedly attractive for income-focused investors. However, the sustainability of such a high payout is questionable, given that its payout ratio currently sits at an alarming 4,400%. This suggests BCE is paying out far more than it earns, raising concerns about how long this trend can continue. On the other hand, Rogers offers a more modest dividend yield of 4.1%, but with a much healthier payout ratio of 70.7%. This leaves room for reinvestment and long-term dividend stability, a factor that may appeal more to conservative investors.

Debt levels are another critical consideration, especially in a capital-intensive industry like telecom. BCE stock's total debt of $40.1 billion results in a debt-to-equity ratio of 222.9%, which is significant but not uncommon in this sector. The company's operating cash flow of $7.5 billion provides some reassurance that it can manage this debt load. Yet the margin for error remains thin.

Rogers, by comparison, carries even more debt at $45.9 billion. And with a notably higher debt-to-equity ratio of 407.6%. This elevated leverage is largely tied to its ambitious acquisitions, including its recent deal to purchase BCE stock's 37.5% stake in Maple Leaf Sports & Entertainment (MLSE) for $4.7 billion.

Looking ahead

The competitive landscape is another factor to consider. Both companies are under pressure from newer players. Future growth prospects vary significantly between the two companies. BCE stock is doubling down on its core telecom operations while divesting from non-core assets like its MLSE stake. This strategy could help the company reduce debt and stabilize its financials, but it may also limit its ability to capture growth opportunities outside of telecom.

Rogers, by contrast, is leaning into its media and sports divisions as key growth drivers. The company's increased stake in MLSE gives it greater control over lucrative assets like the Toronto Raptors and Maple Leafs, but the associated costs could weigh on its balance sheet.

Both companies are fundamentally solid but face significant headwinds in a changing market. BCE stock offers the allure of high dividends but at the cost of elevated risk. Rogers provides a more balanced profile, with stable dividends and diversified growth prospects, though its ambitious expansion strategy could lead to growing pains. The decision ultimately comes down to your investment goals. Income-focused investors may lean toward BCE, while those looking for growth and stability might find Rogers a more compelling choice.