BCE Inc. (BCE-T)

He's in a bit of a conundrum right now given how far it's come down. Yield is now in excess of 10%, which is usually a big warning sign. Dividend is frozen to be able to fund recent US acquisition; first time in a long time they've done that. Company probably loath to cut the dividend; MFC did it, and was in the doghouse for years. If he found a horse with a better total return, he'd switch.

Telecom industry is seeing more competition and fighting for market share. None of the telcos will see much margin expansion in the near term.

Tough to be a telecom in Canada, so it's moving beyond our borders with its latest acquisition. CRTC is often overbearing. Capex is not bad in the concentrated GTA, but increases substantially as you go across our big and somewhat underpopulated country. Telus is in the same spot. Hard to hold over the next little while.

Overdone at these levels, will probably bounce over the next 3-6 months. Interest rates coming down should help. 

Makes sense to take the loss to offset other gains, consider getting back in after the waiting period. Thinks it can maintain its dividend. Pays a really nice dividend, and if you need that to live your life, you many not want to sell. 

He did his deeper dive. He's going to sell on strength. Not willing to sell here, but he's not adding. Very discouraged by the company's recent moves.

He sold with news of recent US acquisition, wouldn't step in today. Company sold MLSE saying proceeds would be used to pay down debt, but then turned around and made an acquisition with a rich purchase price necessitating more debt. More capex now needed. Payout ratio still high.

Gave up a golden sports asset to buy a cable asset in the Pacific Northwest, instead of paying down debt. A head-scratcher. Competitive industry; harder to grow revenue, especially when costs are escalating. He owns Telus.

One of his favourite investing lessons: In 2008, the Teachers Pension Plan was taking this out at $41 + 1 share, above today's level and pre-5G. Didn't sell then, because his mentor said that if the assets are good, then the management is temporary. The market hates what management has done, but they now have built a 5G network and the investments of the last 10 years have made this company worth more than 10 years ago. He's happy to buy this under $40. There could be a change of government next year. It's undervalued now. True, he doesn't like the recent US acquisition, but they can apply lessons learned in building 5G here to there, the U.S. but the selling has been overdone.

At the present price its dividend yield is 10% and looks secure.The recent acquisition disappointed investors, including him, who were hoping for debt pay-down. He is hoping that the Board knows what they are doing.

In general, telcos are a tough area right now; earnings growth is weak. Investors are in wait-and-see mode. Yield is now 10.4%, lots of questions whether it can stay there. Management did say dividend won't increase, but did not say it would decrease and this is a positive sign.

When a stock's having a hard time, it can get worse. Looked cheap a month ago, but is now even cheaper. When you buy use a stop loss, so that a little mistake doesn't become a big one; this will save your bacon. Steer clear.

The sell-off is overdone. They already pay 8%, so do they need to grow that dividend? Pausing the growth is prudent. Also, divesting from major league sports and investing in fibre makes sense (most of that sports money will pay for the fibre company). No, BCE is not headed for disaster.

He owns it for the dividend, and so do most Canadians. Not for the growth. He saw the Ziply acquisition headline this morning and just scratched his head. Market's confused too. If pressure remains, will be forced to cut dividend.

He needs to do a deeper dive on this story.

We have some comments posted on the deal today. For now, with a 10% decline in the stock, we would hold. But the company may have lost credibility here, and with the dividend set to be flat for awhile we think it may struggle a while longer. But we would prefer not to sell into the 'shock' of the news. 
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Price bottom is probably in so he's getting interested; operating and financials fundamentals are probably closer to a bottom than a top. Divesting MLSE was a good move. Yield is very high, close to 9%, but growth aspirations had to ratchet down. Primary driver of cell phone demand is population, and federal government has lowered immigration numbers.

Hard to find a catalyst for growth. Massive debt, dividend not covered. Business fundamentals aren't great. So much regulatory pressure, plus competition. Sold his telcos, mainly because price of cell phone service for Canadians is a big risk. MLSE was a prize asset, and they sold it, not a good look. Stay away for now.

He sees about $3 EPS, which at $46 per share, comes to a bit over 15x trailing PE. Looking forward, earnings growth isn't going to be very good. Is it worth the value it's trading at today? For the dividend, yes, as long as they can maintain it. Not a growth company, so should trade at a lower multiple than the market. You could make the argument that it should trade where the banks do, around 12-13x. They'd be equivalents, so it's pretty much around fair value at this point.

But the discussion point right now is that if they're borrowing money to pay the dividend, then at some point, a dividend cut is likely. For a long-term dividend payer in Canada, that's the challenge right now.