Buying a Telco?

To diversify my investments, I’ve been thinking about adding a telecommunications company (telco) to my portfolio, namely, one or more of the “big three”. Most personal finance and investing gurus have advocated this in some shape or form since holding a telco like any of the following can be part of a sound, diversified, investment portfolio:

• Bell Canada Enterprises (BCE)
• Rogers (RCI.B)
• Telus (T)

I agree with the diversifcation, but should I purchase one and if so, when?

While every investor has their favourite(s), I believe owning a Bell, Rogers or Telus (or all three?) who provide telecommunications services (such as voice, data, internet, cable and in some cases, more) are good investments because they…

• Are large, blue-chip, well capitalized, dividend-paying companies who have a great history of rewarding their investors;
• Provide relative protection from price volatility and market risks.

This is not to say these “big three” have no risks involved. Rather, in comparison to say, the broad menu of tech stocks available or stocks in other market sectors, these telcos are considered less risky and can be strong value holds for Mr. Dividend Growth Investor (me). Other defensive investment plays in Canada include banks, pipelines and utilities stocks.  I already own a combination of these but no telcos (yet). Recall the TSX composite index weighting is (approximately):

• Financials ~ 32%
• Energy ~ 26%
• Materials ~ 20%
• Industrials ~ 6%
• Consumer Goods ~ 5%
• Telecommunications ~ 4%
• Other sectors / the rest ~ 7%

If I’m going to build a solid, diversified portfolio of Canadian dividend-paying stocks, I think I need to hold at least one telco – the TSX almost prescribes it.

What do you think?
Do you think any of the big three are worth holding?
If so, which ones, why?
When is a good time to buy?