Picture this: while other Canadian telecom giants flash their eye-catching dividend yields like neon signs, Rogers Communications (TSX:RCI.B) stock quietly maintains what could be the most reliable dividend stream in the industry. In a market where BCE flaunts a 10.9% yield, and Telus advertises a 7.7% dividend, Rogers's modest 4.2% yield might seem underwhelming at first glance. But seasoned dividend investors know that when it comes to long-term passive-income investing, the flashiest yield isn't always the safest bet.

If you have to choose between a steady, reliable income stream and a potentially risky higher payout — Rogers stock might just be the tortoise that wins this retirement income race.

Dividend safety: A key differentiator for Rogers stock

It's generally true that telecommunications sector stocks' utility-like cash flows make their dividends reliable income sources, but cuts do happen. U.S. giant AT&T cut its payout recently in 2022 when its dividend yield exceeded 10%.

The key to successful dividend investing lies not just in the yield but in the sustainability and safety of the payments. On this front, Rogers stock stands out impressively among its dividend-paying peers.

With an earnings payout ratio of just 70.7% — the lowest among major Canadian telecoms — Rogers maintains significant breathing room to sustain its quarterly dividend of $0.50 per share. Even more encouraging, the company's declared dividends represent only 36% of its free cash flow during the past 12 months, showcasing exceptional coverage that dividend investors should find appealing.

Strong operational growth and financial discipline

Recent developments paint an optimistic picture for Rogers stock. Following its successful Shaw Communications acquisition, the company is demonstrating strong operational execution with industry-leading margins in both wireless and cable segments. Management's guidance for 2024 projects a robust 12-15% sequential growth in adjusted earnings before interest, taxes, depreciation, and amortization (adjusted EBITDA) and an impressive 24.4% year-over-year increase in free cash flow, potentially reaching $3.1 billion.

The company's commitment to financial strength was recently highlighted by an innovative $7 billion structured equity financing deal. This strategic move will accelerate debt reduction, with the leverage ratio expected to reach 3.7 times by year-end — well ahead of previous targets. This improved financial position could pave the way for future dividend growth, although the payout has remained unchanged since 2019.

Market leadership and operational excellence

Operational performance continues to impress, with Rogers maintaining its position as a market leader. During the third quarter of 2024, the company achieved its best-ever cable and wireless margins at 58% and 66%, respectively. The once-ailing media segment also showed strong momentum with 11% revenue growth and a 25% increase in adjusted EBITDA. This operational excellence is backed by network superiority, with Rogers recently receiving recognition for Canada's most reliable 5G network and fastest internet service.

Weighing the investment case: Is Rogers stock a buy for its dividends?

There have been some challenges to consider before investing in Rogers stock for its 4.2% dividend yield. The stock has faced headwinds, declining 23% year to date amid intense industry price competition and regulatory pressures. The requirement to provide wholesale fibre access to smaller competitors at regulated rates poses an ongoing challenge to fibre margins.

However, Rogers stock offers an attractive proposition for long-term dividend investors. While the current yield might not be the highest in the sector, the combination of superior dividend coverage, strong operational performance, and improving financial metrics suggests a well-positioned investment for those seeking multi-decade reliable income. The company's utility-like cash flows and market leadership in critical telecommunications infrastructure provide a solid foundation for sustainable cash flows and investment returns.

Given the 4.2% dividend yield, Rogers stock can double your money in a decade if shares can average 3% annual capital gains, the Rule of 72 predicts.

While past performance has been challenging, with Rogers stock trading sideways over the past five years, the company's forward-looking metrics and strategic initiatives suggest better days ahead for patient dividend investors.